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India outshines west... - Views on News from Equitymaster
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  • Aug 31, 2002

    India outshines west...

    The bourses finally showed signs of life this week. The BSE Sensex finished up 2% while the NSE Nifty notched up over 1.5% gains. Tech counters were the toast of investors. Even blue chips saw some revival. The undercurrent towards the end of the week was bullish.

    The spurt in tech counters seems out of sync with the NASDAQ, which saw nearly 5% decline during the week. With Intel and Sun Microsystems both warning of difficult tech spending environment going forward, the global tech outlook continues to be clouded. What's more, the Indian indices outshone the global indices that closed the week largely in the red.

    Indices 24-Aug-02 31-Aug-02 Change
    BSE 3,119 3,181 2.00%
    Hang Sang 10,246 10,044 -2.00%
    Dow 8,873 8,664 -2.40%
    Nikkei 9,867 9,619 -2.50%
    Dax 3,828 3,713 -3.00%
    FTSE 4,390 4,227 -3.70%
    NASDAQ 1,381 1,315 -4.80%

    What could have egged on the Indian tech companies is the fact that increasingly the world is looking at India for its outsourcing needs. With Intel reiterating its commitment to invest more in India and of tripling its employees within the next three years, the strength of Indian mind comes to the fore. There continues to be a feeling that Indian tech companies are likely to continue growing at decent rates over the next few years. Also, valuations for a lot of the second rung tech companies seem compelling. But one cannot rule out operator led sentiment in these counters.

    Pivotals in cement, FMCG, banking, auto, media, pharma, steel and telecom all supported the indices. With rains seemingly picking up and UTI sell off tapering, investors seem back, lapping up blue chips at attractive valuations.

    But all this does not guarantee a sustainable trend. The economy continues to grapple with slowdown and the political scenario continues to be haywire. India badly needs to reinforce infrastructure development, otherwise over the long run bourses will revert back to the mean. Letting go of a worthy minister may be a price one has to pay for a 'coalition' democracy, but what signal the next incumbent sends out will determine the course of India's power sector reforms. With coalition partners bent upon stalling one of the few successes of the NDA government, the divestment of BPCL and HPCL also seems in limbo.

    In the Indian context, government policy and action is one key trigger for economic progress. If that continues to be in doldrums, then India Inc. will have to shrug it off and continue moving forward. Also, local factors more than global ones would probably determine the course of the Indian bourses in the long run. Look to enter quality in these conditions.



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