PSUs in the reckoning… - Views on News from Equitymaster

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PSUs in the reckoning…

Feb 3, 2001

Although the markets closed the week in positive territory they were made to work for it as they lost ground on three days out of five. Consequently, the week saw only marginal gains. The BSE and NSE rose by 22.1 points (0.5%) and 8.8 points (0.6%) respectively. The markets opened on the back foot as the devastating earthquake in the state of Gujarat rocked the sentiment on the bourses. The sentiments, however, were lifted as corporates issued notices of little or no damages to their plants. Further, the sharp drop whetted the appetite of bargain hunters resulting in the markets making a strong comeback.

Allan Greenspan, Chairman of the Federal Bank (U.S), this time around failed to enthuse the bourses. The surprise rate cut of 50 basis points on January 3rd of this year had resulted in a global rally. However, with American economic indicators weakening, the markets expected a monetary expansion policy. Consequently, we did not see the same reaction on the current round rate cuts.

On the domestic front the cement sector continued its run on the bourses. The enhanced realizations have worked their way to improved results for most of the companies in the third quarter. Consequently, keeping interest alive in the sector. Further, the rebuilding in the state of Gujarat will lift demand and possibly realizations in the Western region.

However, the week belonged to the public sector unit stocks. News on disinvestments set these counters on fire. The week started with activity in Engineers India. The government has decided to privatise the company and the petroleum ministry has been directed to prepare a cabinet note for divestment. Indian Oil Corporation has expressed its desire to purchase 26% in the company. Further, the news of disinvestment in Videsh Sanchar Nigam Ltd. (VSNL) lifted the PSU counters primarily in the telecom and oil sector.

In the weeks ahead the focus will zero down to the budget. Markets await what the Finance Minister has to offer this time around.


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