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Slow but on track...

Oct 26, 2002

The indices touched 52-week lows this week. The decline was due to a combination of factors ranging from Wall Street volatility to Dr. Reddyís setback on the generics front. But perhaps the most significant contributor to this decline was the third consecutive dip in FMCG major Hindustan Lever's quarterly topline.

If you look at the index from a 5-year perspective, then too, the Sensex doesnít seem to have come far. Though the data is not really accurate owing to the change in the composition of the Sensex over the years, the overall mood of investors does stand out. But it is not as if all investors have lost out on equities during this period, rather the series of scams, Asian and tech meltdown, as well as the jumbled mixture of government policies that has reflected on the indices.

If we look at the statistics, our GDP growth trend reads like this: 7.8% in FY97, 4.8% in FY98, 6.5% in FY99, 6.1% in FY00, 4.0% in FY01 and finally 5.4% in FY02. CMIE has recently downgraded GDP estimates to 3.1% for FY03. So, in that sense our bourses have moved in tandem with the GDP growth.

With nearly 25% of our GDP and 70% of population still dependent on agriculture, the uneven rainfalls have also had a major bearing on the bourses. One can see its effect on FMCG mirror, HLLís financials too. Though the company continues to sweat its assets and squeeze its costs to become more profitable, the topline concerns have not gone away. Moreover, the economic reforms are continually slowed down by political hitches.

It is not that we havenít made any progress. If you look on the positives, India Inc. has become more competitive in the last few years, one sees more service providers both Indian and foreign (insurance, mutual funds), housing loans have become cheaper, one has access to global media, government has made a small start on labour reforms, infrastructure has regained thrust, power reforms are building speed, judicial reforms have started and state governmentís have become pro-active. Also, the realisation to be literate among a large part of the population has gained ground. Hopefully, we will see better highways and road connectivity by FY07.

Agreed that India has taken the slow train to progress. But with over 1 billion population, India is hampered in progress. But we believe that India in the next decade will be a much better place to live in, with higher standard of living, more jobs and financial stability. With that belief, automatically the outlook for Indian equities improves.


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