Indian investors expect privatization boost to rev up market

By India Abroad News Service   |   Monday, 09 September 2002, 07:00 Hrs
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MUMBAI: India's bruised investors hope the government will press ahead with its ambitious privatization drive in the days ahead despite a clash of political interests and invigorate the lackluster stock market.

Analysts say the investors will closely track the government's decision on the proposal to sell its stake in two of the nation's biggest petroleum refiners before putting in more money on the bourses.

"The investors are very cautious at this stage. They are now completely focused on the privatization drive of the government," said a fund manager with a foreign brokerage firm.

"The market movement in the coming days will mainly depend on what course of action the government decides to take on the issue of divestment of its stake in Bharat Petroleum Corporation Limited (BPCL) and Hindustan Petroleum Corporation Limited (HPCL).

"The privatization of these firms will not only be a test of the disinvestment agenda, but will also be a test of the government's willingness to push ahead with tough reforms despite differences within the ruling coalition," the fund manager told IANS.

Blue-chip equities slipped lower in lackluster trade in the week ended Friday on fears that the coalition government of Prime Minister Atal Bihari Vajpayee would succumb to pressure from its allies who want to stall the disinvestment of the two oil refinery majors.

The differences among the constituents of the ruling coalition over the privatisation of BPCL and HPCL resulted in a large-scale institutional sell-off in shares of state-run companies over the last two weeks.

While the BPCL stock has plunged nearly 25 percent from its April high, HPCL has registered a fall of 15 percent in the same period.

In the intra-week trade ended Friday, the market opened higher, as investors picked up blue-chip equities buoyed by the government-approved reform package announced for the state-run mutual fund Unit Trust of India (UTI).

Millions of investors in the troubled Unit Trust of India (UTI) heaved a sigh of relief after the government unveiled a major reform package to ease liquidity pressure.

The package, which includes a fresh infusion of 145 billion to meet redemption liabilities, is aimed at streamlining the operations of the troubled financial giant.

The market slipped lower on Friday and remained in the negative zone for the rest of the trading session on privatisation blues.

Infosys Technologies, the country's largest listed software exporter, lost 1.9 percent from its previous week's close to end the week at 3,534.15 on the sustained downturn in the U.S. markets.

Cement major Grasim Industries closed the week 1.2 percent higher at 317.85, following a strong growth in cement dispatches reported by various manufacturers over the last couple of months.

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