ad info

 web features
 magazine archive
 customer service
  east asia
  southeast asia
  south asia
  central asia

Web-only Exclusives
November 30, 2000

From Our Correspondent: Hirohito and the War
A conversation with biographer Herbert Bix

From Our Correspondent: A Rough Road Ahead
Bad news for the Philippines - and some others

From Our Correspondent: Making Enemies
Indonesia needs friends. So why is it picking fights?

Asiaweek Time Asia Now Asiaweek story

Rise and Fall in Bombay

The bourse may soar -- if New Delhi delivers

As the Bombay Stock Exchange’s Sensitive Index soared 35% to 3,600 points in less than two months, K. N. Atmaramani issued a warning. “Expect a correction,” said the 58-year-old managing director of Tata Asset Management, a 17-year veteran who is considered by many as a market guru. “I don’t see much strength in this rise. Investors assume the PM will give them everything they want.” As it happened, Prime Minister H. D. Deve Gowda did not. On Jan. 30, the government went back on a pledge to implement a stimulus package, including tax breaks. It said reforms already announced were sufficient. The Sensex plunged 221 points. What now for the bourse? Atmaramani spoke with Asiaweek’s Shirish Nadkarni in Bombay.

Will the market recover?

For every speculative rise of 300 points, you might see on average a drop of at least 100 points. After the recent 900-point rise, I see a fall of at least 300 points. Still, the government’s commitment to capital market reform is a healthy sign. It supports the establishment of a depository [for paperless trading] and is looking into channeling provident fund money into capital markets. Good, long-term measures will make the exchanges vibrant again.

Our own studies indicate that the markets are going to see a bullish phase until the Sensex hits 4,000 points. After that, any rise will depend on government plans to halt the country’s current economic slowdown. Major improvements in infrastructure are needed. An estimated $125.5 billion will be required over the next five years to build bridges, roads and telecommunications facilities. Yet foreign direct investment is very low compared to China. But if approval procedures are speeded up, the stock market may see a sustained rise for the next one or two years. A lot of money is available. And the stock market is still cheap compared with others in the region.

But aren’t poor corporate earnings likely for the fiscal year ending March 1997?

Earnings have been badly affected by the slowdown, but they are reviving. The Reserve Bank of India has shifted its focus from attacking inflation by tightening the money supply to tackling slower growth. Many people were prepared for a recession. That is no longer a probability.

Source: Datastream

What changes do you advocate for the bourse?

The emphasis in India’s stock markets has invariably been on quantity rather than quality. But do we need some 800 merchant bankers, or are 40 professional outfits that properly evaluate issues sufficient? Similarly, should there be 6,500 shares listed on the Bombay Stock Exchange when the share capital of nearly half of them is not even $1.5 million? I advocate de-listing small companies and transferring them to India’s Over-the-Counter Exchange.

What about foreign investors?

They have thus far pumped more than $7 billion into the Indian capital markets -- and that is a lot of money. Initially, they did a lot of research. That is one of their greatest contributions to the Indian scene. But of late, foreign institutional investors have become traders. They used to buy shares which their research showed were good. These days they go into highly liquid counters only. They also pay premiums for large lots of shares, which spoils the market. And when they want to get out, they just sell, even taking big losses in their stride. If they had come in as long-term investors, they should hold on to these shares.

What sectors do you like?

There are a few industries that have not been affected by the country’s economic upheavals. Food processing, for instance. Even in the worst times, this industry performs well. Pharmaceuticals is dominated by multinationals, but the demand for drugs will continue to be high. The sector has tremendous export potential. We also like power, computer software and telecommunications. With proper reforms, the petroleum industry has a great future. We are also looking at some turnaround industries. It is a good time to buy into aluminum and cement. The cement industry should turn around, and there is no fear of competition from imports. I would avoid the auto industry, which is facing a slowdown.

What shares do you favor?

Spreads among finance companies are falling. I don’t like the sector, except for the State Bank of India. Of the highly liquid shares, Mahanagar Telephone Nigam Limited, Tata Power, electricity distributor BSES and engineering firm Larsen & Toubro are blue-chips that one should buy at every market fall. I like cement stocks ACC, Madras Cement and Gujarat Ambuja. Since we believe that the aluminum industry will turn around, Hindalco and NALCO are good bets. Another is MICO, an auto ancillary. Among smaller firms, I favor switching-equipment maker GEC Alsthom, Datar Switchgear and vehicle engine maker Kirloskar Cummins. Thermax is also a good stock to buy on a market dip because of its infrastructure links.

This edition's table of contents | Asiaweek home



U.S. secretary of state says China should be 'tolerant'

Philippine government denies Estrada's claim to presidency

Faith, madness, magic mix at sacred Hindu festival

Land mine explosion kills 11 Sri Lankan soldiers

Japan claims StarLink found in U.S. corn sample

Thai party announces first coalition partner


COVER: President Joseph Estrada gives in to the chanting crowds on the streets of Manila and agrees to make room for his Vice President

THAILAND: Twin teenage warriors turn themselves in to Bangkok officials

CHINA: Despite official vilification, hip Chinese dig Lamaist culture

PHOTO ESSAY: Estrada Calls Snap Election

WEB-ONLY INTERVIEW: Jimmy Lai on feeling lucky -- and why he's committed to the island state


COVER: The DoCoMo generation - Japan's leading mobile phone company goes global

Bandwidth Boom: Racing to wire - how underseas cable systems may yet fall short

TAIWAN: Party intrigues add to Chen Shui-bian's woes

JAPAN: Japan's ruling party crushes a rebel ě at a cost

SINGAPORE: Singaporeans need to have more babies. But success breeds selfishness

Launch CNN's Desktop Ticker and get the latest news, delivered right on your desktop!

Today on CNN

Back to the top   © 2000 Asiaweek. All Rights Reserved.
Terms under which this service is provided to you.
Read our privacy guidelines.