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M U T U A L F U N D S They are still a good bet No doubt tech funds have been slammed by the stockmarket jitters, but they are still safe for the small investor. The loss was mutual. When Dalal Street melted on April 4, 2000, driven by the Infotech, Communications and Entertainment (ICE) stocks, the equity funds joined in the fall. Having locked up 60 to 75 per cent of their portfolio in ice stocks, fund managers of diversified equity funds watched their NAVs melt by a quarter. The rash of sector-specific infotech funds that were launched during the last 6 months saw their NAVs plummet by nearly 50 per cent. Did that mean redemption for infotech funds? No. Says Dhirendra Kumar, 30, CEO, Value Research: ''The crash (in the market) took everyone by surprise, and there was no opportunity to get out.'' The recovery in ice stocks averted large-scale redemptions. While most of the funds deny that there were redemptions in sector funds, it is likely that redemptions would have been a contributor to the market crash. However, mutual fund investors take a medium to long-term investment view. Suggests Vivek Reddy, 37, CEO, Kothari Pioneer Mutual Fund: ''Allocate 50 per cent of your investment to the new economy, and the rest to old economy firms which have modernised.'' The meltdown in equity funds does not mean investors should shift to diversified equity funds, because they too have a large exposure to ice stocks. So, check out the fund's portfolio mix before you write out the cheque. -Roshni Jayakar I N D I A '
S C R E D I T R A T I N G Finance minister Yashwant Sinha may not have won too many friends with his Budget 2000. But the minister can certainly count the world's top credit rating agencies among the few that he did. Earlier this month, Fitch IBCA-a Japan-based rating agency-assigned its highest sub-investment grade rating of BB+ to India's senior unsecured foreign debt issues. And Moody's-another ratings heavyweight-hinted at an upgrade of the sovereign credit rating when the next full review happens in the next one year or so. Apparently, the improved ratings by these agencies are a direct fall out of the Budget's attempt at controlling government expenditure and generating resources through disinvestment. Liberalisation of more industrial sectors and the relatively stable political climate also helped. Besides, a better foreign investment climate and the 'realistic' fiscal deficit target seems to have impressed the rating agencies. Says S. Bhide, 46, Director, National Council of Applied Economic Research: ''Cutting public expenditure and bridging the deficit through divestment can help further improve India's ratings.'' Some economists believe that more deep-rooted measures are needed before the sovereign rating will improve. Says Indira Rajaraman, 52, RBI Chair Professor, National Institute of Public Finance and Policy: ''There is still a lot of wasteful governmental expenditure, which good performance of a few sectors like infotech will not cover up.'' Clearly, just making the grade will not do. -Sadanand Tutakne C O N
S U M E R M A R K E T S Have money, will splurge. That seems to be the unequivocal message coming from Consumer India. In a range of industries, including automobiles to consumer electronics to consumer soft to cellular phone services, the sales graph is speeding north. The passenger car industry posted record sales in March. Market leader Maruti Udyog upped sales by 22 per cent, rolling out 4.06 lakh cars during the fiscal year 1999-2000. The boom was evident even in the sub-compact segment, where General Motors India, Ford India, and Fiat Auto India upped sales by an average of 8 per cent. Buoyed by the boom in the stockmarkets-thanks to the dot.com frenzy, and the general optimism about the economy-consumers are, literally, eating into their savings. Consider the non-cyclic fast moving consumer goods (FMCG) industry. Sales of the industry czar, Hindustan Lever, crossed the Rs 10,000 crore mark, and malted-foods company Cadbury India saw its topline rise by 32 per cent. The fiercely competitive consumer electronics market found more buyers, pushing the industry turnover from Rs 9,200 crore to Rs 11,200 crore. Says S. L. Rao, 64, former Director-General of the National Council for Applied Economic Research (NCAER): ''Lots of people have made unearned money on the stockmarkets and they are spending it now.'' That apart, companies are expanding markets. Take, for example, mobile phone services. The number of subscribers rose by 50 per cent last year, but the metro areas grew by only 44 per cent. That apart, generous financing schemes and a low rate of inflation are boosting India's hesitant consumerism. -Aparna Ramalingam E N T E R T A
I N M E N T It's a script for a blockbuster industry. The recent Federation of Indian Chambers of Commerce and Industry's (FICCI) report on the Indian entertainment industry predicts that the sector will ring up revenue worth Rs 60,000 crore by 2005. A big chunk of it, the Arthur Andersen-compiled report says, will come from film software, followed by television broadcasting, television software, and live entertainment. Unfortunately, radio, which reaches out to 97.30 per cent of the Indian population, is expected to account for a bare 2 per cent of the overall industry revenue. For the big picture to light up, the report says, the government needs to put the industry on a level playing field. As far as Bollywood is concerned, the main villain, apparently, is the high rates of entertainment tax across the country. Rationalising it downward, the argument goes, will have ripple effect on the retail theatre-end and producers and exports. That will allow the industry-which employs 25 lakh people and produces 800 films a year-to realise its potential, and further boost its exports, which grew by 80 per cent over the last 2 years. The spotlight is on the industry. It's time the government called for some action. -R. Sridharan |
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