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Markets looking to break-free

Nov 24, 2001

Investors fled stocks markets, as a worsening global economic environment topped with the WTC incidents led to a sharp slide in global indices. But any belief of a turnaround in ground realities was likely to lead to an equally sharp comeback. With a smart bounce back in domestic markets, does it herald the start San Fermin fiesta (Spanish bull run). The rise in domestic markets seems to reflect the belief that the economy has bottomed out and a turnaround is unfolding. Commodity stocks, which tend to be closely linked to the economy and are first to reflect changes in business cycles, have run up significantly. Supporting the run is the much improved performance of the infrastructure sector for October '01. However, cement is primarily responsible for the improved showing. Cement demand has remained buoyant with roll out of the road infrastructure projects. That said, one will have to wait for latest economic data to corroborate the upbeat mood of investors and support/justify any further run in the markets.

The Finance Minister, Yashwant Sinha, has once again set himself a stiff disinvestment target of Rs 120 bn for FY02. Going by the track record, not many, realistically, expected the target to be met. But, maybe the focus needs to be on the efforts to get the show on the road. The strategy, it seems, is to sell the small, low profile companies, which are not likely to raise much political opposition. Running a little ahead, a case for big-ticket sell offs could be made if the private sector is able to set a good precedent with early disinvestments. Markets do not seem be building in expectations for a successful roll out of disinvestment. Any indications of the same could prove to be a strong driver.

A handful of scrips, which belonged to the K-10 portfolio have been running up once again. Making quick money is very tempting but we would like to remind investors of the sleepless nights over the past 18 months.


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