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Its budget time... - Views on News from Equitymaster
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  • Feb 24, 2001

    Its budget time...

    During the week the BSE 30 Sensex declined by 4.8 percent and the NSE Nifty declined by 4.4 percent. With the NASDAQ touching its 2 year lows, Indian TMT counters shivered. Almost all key pivotals are hovering near their 52-week lows. Fears of a slowdown in consumer and corporate spending on technology have put a growth rates under suspicion for the sector.

    Telecom equipment stocks are also facing the brunt as it is expected that they will cut down their network expansion spends. The negative sentiment was reflected in the domestic stocks as well. Banking was another key loser. This could be mainly due to profit booking entering these counters. The sector had run up significantly in the recent past following the RBI’s interest rate cut and anticipated M&A activity.

    The sell off also engulfed the old economy counters. Market circles opined that operators went for profit booking on Friday ahead of the upcoming budget.

    In contrast the public sector stocks had a relatively favourable week. However, with the sharp slide on the last trading day these stocks also declined. The Government sent strong signals to the investing community regarding its disinvestment intentions. The Government has sold Bharat Aluminium (Balco) to the Indian copper major, Sterlite Industries.

    However, the last is yet to be heard on Balco’s disinvestment, with the opposition up in arms against the government’s decision. Despite this, the disinvestment does spell out the government’s intention to get out of running businesses and rather concentrate on running the affairs of the state. The decision thus sparked off heightened buying in another aluminium PSU, National Aluminium Company, and Hindustan Zinc.

    On Friday Night, the NASDAQ was down over 4% intra-day, but recovered towards the end to close up 0.8%. This was despite earnings warning by Motorola and Sun Microsystems. There is anticipation in the air that the US Fed might cut interest rates soon. But naysayers are of the opinion that with inflation rate picking up, the US Fed might not cut rates sharply.

    Monday marks the beginning of the Budget week. With the Economic Survey of India, 2001 stating that the performance of infrastructure has been mixed and re-iterating the government’s resolve to divest and push forward power sector reforms, the utilities and PSUs may continue strong showing. Some buying may also come in the tech stocks owing to the NASDAQ recovery.

    But the final outcome for the next week will be determined by Mr. Yashwant Sinha’s Budget 2002. So, all eyes on the budget



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