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Flattish short term

Oct 27, 2001

The bourses closed more or less at the same levels this week (Sensex up 5 points and Nifty up 6). The gaining spree ended as the initial hoopla over the credit policy died down. The sluggish Wall Street provided no solace. The week seemed like introspection time for market movers. The bourses (both US and Indian) are more or less at the pre-September 11 levels. From here on the economy would be the major driver of sentiment. In the US the consumer spending is the key to economic revival and so too in India.

So far the result season has been reasonably good for India Inc. Sectors like software, cement and auto have done well, while hospitality and some FMCG companies seemed under pressure. Post result season the bourses would now keenly watch the government’s disinvestment and infrastructure development moves.

The signals that emanate from the North Block are positive in both these directions. With the divestment ministry, under Mr. Shourie, keen to get on with the reforms, we would most likely see some major companies getting divested by the year end. Though the minister may fall well short of the disinvestment target of Rs 120 bn for FY02, the momentum generated on this front is heartening.

The government’s keenness to improve spending on plan expenditure is reflected by the Prime Minister’s road and rural electrification project. Though there is still a long way to cover, atleast we are in the right direction. The forward looking credit policy is likely to rein in the government’s burgeoning interest burden as well as encourage investments in the country. With India one of the few countries expected to log a 5%-6% GDP growth this year, it is likely to figure in the list of global investment destinations.

The investors are wary of putting money in the stock market due to the uncertain global environment. However, except for war worries, India has much to look forward to. With the debt market running almost at its peak, stock markets offer a viable alternative over the long term.

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