PRIVATISATION IS ONE SURE-FIRE TRIGGER...
...but with elections round the corner, don't expect the government
to make too much noise about disinvestment
EXCEPTIONALLY GOOD FINANCIAL PERFORMANCE
FOR 2002-03 CAN FUEL A RALLY...
...but market has already factored in an estimated 20 per cent
growth in earnings
THE BOND MARKETS ARE LOOKING OVERHEATED...
...but a shift towards equity won't happen suddenly
AGRICULTURAL RECOVERY MAY PROVIDE A FILLIP
TO ECONOMIC GROWTH...
...but the lag effect of last year's drought will be felt in
2003-04
FII MONEY IS COMING IN (THOUGH NOT POURING
IN)...
...but there's little domestic follow-up from institutions,
mutual funds, and retail investors
THERE'S PLENTY WEIGHING DOWN DALAL STREET
UNCERTAINTY regarding US-Iraq war, and N.
Korea's nuclear plans
HUGE REDEMPTION pressures on UTI, estimated
at last count at over $1.5 billion
SLOWDOWN on disinvestment front; HPCL
privatisation won't happen till September
RETAIL INVESTORS are staying away; only
2.7 per cent of household money going into equity as against 15
per cent 10 years ago
BUDGETARY EXPECTATIONS of abolition
of corporate surcharge and more aggressive direct tax reforms belied;
internal debt scenario and fiscal deficit big worries
WAR-TIME INVESTING
How markets have reacted in previous war situations.
It
is not the war but the uncertainty that is keeping markets on tenterhooks.
And this explains why the market usually recovers after the actual
war starts. Yes, there will be some panic selling when the actual
hostilities begin, but this won't last too long. And this explains
the age-old stockmarket maxim "buy when there is blood on the
stree". The proposed second Gulf war is very similar to the
first war. So, let's see what happened to the Indian market during
the last Gulf war.
On August 2, 1990, Iraq invaded Kuwait, accusing
it of stealing its oil. For three days running thereafter, the markets
fell, by 8.09 per cent (88.94 points). But once that initial burst
of selling concluded, the market stabilised and started moving up.
Over a one-month period, the Sensex climbed 18.75 per cent (199.11
points). The rally continued and by October 9, the Sensex had gone
up by a whopping 46.89 per cent (or 497.77 points).
Meantime, as the UN and the US made their war
plans, uncertainty once again ruled the roost, and the market began
crashing once again, falling even below the initial war levels of
August. Then the US bombing began on January 15. Predictably, the
market went down initially, and the losses during the next three
trading sessions were to the tune of 6.05 per cent (61.61 points).
Then the Sensex took off, touching levels it hadn't reached earlier.
Three months after the US bombing, the Sensex had gained 30 per
cent, six months later 40.54 per cent, and after one year all of
101.74 per cent.
Should you expect a similar rally once the
second gulf war starts? It will rally, but expect only a small rally.
The huge rally of the early nineties was possible only because the
market was in a secular uptrend after India kicked off the liberalisation
programme. The market is now in a sideways consolidation phase and,
therefore, it is not possible to expect a big rally. The concerns
about the US attacking Iraq may end, but the uncertainties regarding
the US-Korea problem could just continue to spook the market.
-Narendra Nathan
1
2
|
