Weekly Review: Stocks to wobble on privatization jitters

Monday, 30 December 2002, 08:00 Hrs
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MUMBAI: Indian share market investors are expected to enter the last week of 2002 with fresh concerns about the government's ambitious privatisation drive and the quarterly financial performance of the blue-chip technology firms.

Analysts and traders say the benchmark market index will wobble near the unchanged mark in the days ahead, as investors adopt a cautious approach in view of the uncertainty over the privatisation of two state-run oil majors.

The government's on-again-off-again privatisation drive suffered a fresh setback Friday when a decision on the sale of state-run oil firms, Hindustan Petroleum Corporation (HPCL) and Bharat Petroleum Corporation (BPCL) was deferred again.

The Cabinet Committee on Disinvestment (CCD), which met Friday, did not take a decision on their sale since the disinvestment ministry could not obtain legal opinion on the issue.

The government's decision to privatise the two oil firms, which command a 40 percent share of the $15-billion retail oil products market, has been hanging fire since September due to political differences.

"I think worries over the privatisation of HPCL and BPCL will really spoil the yearend buying mood of investors in the days ahead," said a fund manager with a foreign brokerage firm.

"A traditional up-tick at the end of the year next week will also be derailed by concerns over the quarterly financial performance of leading technology companies," the fund manager added.

India's benchmark 30-share Bombay Stock Exchange sensitive index or Sensex closed Friday at 3,398, representing a gain of 60.78 points or 1.82 percent over its previous week's close.

A host of Indian heavyweight technology firms such as Infosys Technologies and Wipro will start unveiling their October-December quarterly results from the first week of January.

Investors closely track the results of the blue-chip software makers before firming up their investment decisions on the counters in the short to medium term.

Next week marks the last two trading sessions in 2002. Traditionally, domestic investors significantly enlarge their position on heavyweight counters towards the beginning of a new year.

Many of them believe that market action during the first five trading days of January often serves as an early indicator for the whole year.

Analysts say the stock market will also see some fairly weak trading volumes as many fund managers, including foreign institutional investors, are on annual yearend vacation.

In the intra-week trade ended Friday, the market opened in the negative zone as gains in select old economy counters were offset by institutional profit booking in technology counters.

But the market index managed to bounce back with vengeance soon and touched a seven-month high with investors picking up shares of technology and banking companies on hopes of robust financial results.

Indian banks and share and foreign exchange markets were closed Wednesday for Christmas.

The market mood was also boosted by the recommendations of a high-powered panel to rationalise the tax structure in the country.

The panel has pitched for lowering of corporate tax and abolishing dividend tax to boost market sentiment as part of a slew of proposals to rationalise the tax structure and boost government revenues.

The government-appointed committee, which submitted its report to Finance Minister Jaswant Singh Friday, also recommended changes in import duty rates on a range of products.

The panel said dividends from domestic companies should be exempt from taxes and long-term capital gains on listed shares should also be fully exempt. Analysts say the moves would help attract the small investor back to the equity markets.

The government had decided to tax dividends in the hands of the shareholder in the federal budget presented in February, resulting in a dip in investor confidence and market sentiment.

In the old economy sector, Ranbaxy Laboratories, India's largest drug maker by sales, gained 5.9 percent over its previous week's close to touch 599.70 on large-scale buying by institutional investors.

The fresh buying was triggered on news that it had received the U.S. Food and Drug Administration's approval to make a generic form of Roche Holding AG's anti-acne drug Accutane.

Reliance Industries, the country's biggest private business conglomerate, rose 2.6 percent to 298.25 after it announced the launch of limited radius mobile phone services in the country.

Reliance Industries on Friday kicked off its much-awaited launch in the telecom sector by offering the country's cheapest mobile services.
Source: IANS
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