The election results will be known soon. The BJP and allies has a good chance of winning enough seats to be able to form the next government, so do I believe! Do not bother your grey cells as to from which survey I got this finding. For those who are into stock markets this belief gives a comfortable feeling. And why not? It gives comfortable feeling to a clutch of industry captains too in Mumbai, who have said that BJP is good for the nation. Yes, BJP is good for the nation and good for the stock markets. Have you not seen the market rallying already?Have I lost my mind? Am I not straying away from an impartial analysis of what is in store for the stock markets. No, not really. That is because stock markets do not always look reality in the face. And in any case, when it comes to pricing stocks, there is a big gap between reality and belief.
Therefore the cardinal principle in trading stocks is to make yourself believe in the unbelievable. That is when that is required. Without such anattitude you can only be a sideline observer to the entire game. But just look at the benefits, if you decided to believe that the country will head towards a stable goverment, courtesy BJP. The future looks rosy. You know BJP is swadeshi oriented! It will protect the home grown corporates. Do not your analytical brain coming in the way to obstruct this line of thinking.
Let us count the good tidings. Foreign entrants will be kept at bay. They will be allowed only when they can bring in moolah into the infrastructure sector. Forget the fact that we have not yet put in place the legal framework, which will enable such investments to earn their return!
Multinationals will have no choice but to lend their technology and cooperate with Indian units. Good show! Stock values of Bajaj Auto, BHEL, BSES could continue to soar. And you have quite a few good indicators to reflect upon. The credit to commercial sector is picking up. The incremental capital output ratio is improving, forget the analysis ofsceptics!
Agriculture is down, but has the biggest potential to be turned around by the new government. What a big boost to fertilizer and pesticide sectors.
Cement is already up and walking. And foreign players want to teach the Indians a few lessons in getting a clutch of companies together,branding the product and selling to the whole of south India. Who knows, sugar may be next? Alcan could think of India being the base for producing downstream aluminium products for the region. The US has a serious shortage of more than 135,000 software professionals. With their restriction of allowing only 65,000 expatriates to be recruited every year, the Indian software companies are in for a boom time.
The Indian government will go ahead to borrow atleat $ 1 billion abroad next year. That would mean the government would get down to serious business. And by the way what is $ 1 billion when international bankers are dying to lend out money in tonnes. Fiscal deficit is no problem!
Money market rates wouldcontinue to be subdued uptil March. RBI would probably hesitate to cut down the CRR before March. It has its own borrowing programme of Rs 70,000 crore to take care of, no sooner the government is formed.
There are reforms in the indirect tax regime. Industry can put pressure on the government to strike parity between imports and local tariffs. It can also ask the government to find funds to increase government expenditure.
How else is the demand for goods supposed to go up? Sure, the government can come up with some original ideas. Chidambaram had already begun the process of redefining the relevance of fiscal deficit. And with no better option, and with the past government to be blamed conveniently, the BJP can take the only route open. Go for sovereign borrowing abroad in a big way. So you see there are any number of positive points, if you really want to look for. Did I hear you say `What about the negatives?'
Well, you are on the wrong boat, Sir. All is well and rosy. And let us take theSensex up. And even if you are a doubting Thomas, you will be forced to join the herd. The stock market has its own games, its own beliefs and its own strategies. You will make a big mistake if you fight the market. My advice is just don't. Ride the rath yathra to profits. Once the bull fever catches on you will see many scrips heading northwards.
ACC could move from Rs 1,325 to Rs 1,400. Arvind Mills could move up from Rs 53 to Rs 70. Bajaj Auto could move up from Rs 560 to Rs.650, BHEL from Rs 324 to Rs 360. Colgate from Rs 250 to Rs 270; GE Shipping from Rs 41 to Rs 46. Grasim to Rs 320. Gujarat Ambuja from Rs 250 to Rs 280. Gujarat Ambuja can move up from Rs 250 to Rs 280. HPCL from Rs 420 to Rs 460. Hindalco from Rs 620 to Rs 750. ICICI could flare madly from Rs 89 to Rs 105!
Yes, that is not impossible, when passions rule high. IDBI could reach that level from the now Rs 85. And who knows, even the laggard IPCL could move up to Rs 70. As to ITC, let me not make a guess. You are yet tosee what a frenzy can do to this blue chip. Would not L&T moving to Rs 275 from the Rs 205 be mouth watering? Or M&M from Rs 243 to Rs 400? And MTNL has the potential for another Rs 50 up? How about gaining another Rs50 at the SBI and Telco counters. For one reason or another elephants do not join the stampede, or they can run only slowly. Yes Reliance too can move up.
So, there is much money to be made in a short time. If you have not followed the interpretations in this column earlier, you could still consider joining in now. What about risks, you ask? Well, let us cross the bridge when we come to it. Right not get busy making your best choices.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
