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Disinvestment: Beacon in darkness - Views on News from Equitymaster
 
 
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  • Oct 6, 2001

    Disinvestment: Beacon in darkness

    The bourses have hardly moved in the past week. This was in contrast to the gains registered by the Wall Street. With Indian companies, especially from the tech sector, slated to announce their September quarter results in the coming week, there is caution in the air. The US-Afghan stand off is another cause for concern.

    One can see a number of ‘experts’ stating that the monsoon may not be as good as expected and therefore, it may not have the desired impact on the demand impetus from rural India. The government’s fiscal deficit target too, continues to look elusive.

    However, the government’s recent measures on the disinvestment front are very encouraging. Finally, after a long lull, the government exited CMC and Hindustan Teleprinters. Though the sum garnered from the sale (Rs 2.07 bn) is a very miniscule compared to the government’s FY02 disinvestment target of Rs 120 bn, nevertheless, it is a small step in the right direction. More than the money garnered, the move sent a clear signal that the government is keen on disinvestments.

    The gains by the NASDAQ (up 7%) and the Dow (up 3%) in the past week are surprising, considering a host of earnings warnings that have hit the Wall Street. Investors may have bought encouraged by the low interest rates and in hopes that the US Fed is likely to cut rates even further. However, there is nothing concrete to suggest that the US economy would pick up any time soon. The US is slated to spend billions of dollars on defence in the near term. Also, in the hurry to get co-operation from countries across the world the Bush administration has been buying support in the form of economic aid packages etc. The effect of all this would show only in the years to come.

    The Indian economy comparatively, is in a better shape. The RBI hasn’t been on an interest rate cut spree unlike the US Fed. However, with RBI set to announce the interim monetary policy on October 21, an interest rate cut could be on the horizon. If the US-Afghan tension escalates then India may see a demand slowdown further, but apart from that it is not a panic situation.

    In the near term all eyes would be on the earnings guidance, which the tech companies give in the coming days. But given the situation in the US, the numbers are unlikely to enthuse bourses.

     

     

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