But the financial performance of Bank of Madura has been average and compared to the private sector banks not all its figures look outstanding; for example the return on assets is just one per cent. The bank boasts more than adequate capital adequacy but then most banks have been shoring up both tier I & II capital, and subsequently claimed a higher capital adequacy.

But in a very unusual development for an Indian bank, Bank of Madura has sent its shareholders an annual statement interpreted under US GAAP, which has put its financials in a very good light and also given an exhaustive view of its NPA position. But very strangely while the statement under the US GAAP was welcome the bank does not follow theIndian accounting standards fully; the AS 11 on treatment of forex transactions in not complied with. But this is also a problem with a number of listed banks including Dena & Bank of India.

Bank of Madura has missed the point that the problem associated with Indian banks amongst foreign investors is not the interpretation of financial statements under Indian accounting standards but rather with the asset quality of Indian banks and consequently the adequacy of provisions made for bad assets. Therefore if BoM really wanted to present a fair view of its accounts to shareholders it should have tightened its asset recognition norms from the present Indian banking standard of 180 days or two quarters to the international norm of 45 days, as is being suggested by the foreign rating agencies. And this norm should be true for all the other Indian banks as well, which will then justify the relatively low valuations of the Indian banking sector.

Markets emerge stronger

Despite the volatility in stock prices onMonday there is no denying the buoyancy in stocks of companies that either comprise or cater to the infrastructure sector. There has been extensive movement in BHEL, ABB, Siemens, Alstom and Thermax. This movement is not isolated but seen over a number of days and with improving volumes. In addition there has been sharp movements in Crompton Greaves, Esab India and Advani Oerlikon. Further there have been strong buying interest even in Telco, Ashok Leyland (ALL) and the leading steel stocks, mainly in SAIL. The movement in SAIL has more to do with its internal restructing and attempts at cash generation, but in any case it is a fit case for a revaluation. This revaluation should also bunk the theory that commodity stocks are completely out of favour with the market for given the right circumstances they will certainly appreciate.

The indication of these gains is clear; the market is buying the economic revival story to some extent. Besides this, the common thread running amongst these stocks is the factthat they have been hammered to several year lows and in many cases to all time lows and have only just participated in the market rally, making it a more relevant rally than most of the other rallies.

The circumstances surrounding individual stocks has aided this process. There has been a restructuring going on in Siemens and Alstom India which should reduce losses by the end of the next financial year. There have been an inflow of orders to ABB and BHEL. New markets are being developed by Esab India in the domestic market and in the export market for Advani Oerlikon, which will yield some additional growth. The buying interest here has been largely driven by FII purchases. As long as the FIIs were out of the market there has not been much activity in these stocks; and fluctuations here have been left to operators whims. Positive FII inflows has ensured a better discounting in the expectation of change in the economic environment. Telco and ALL have already started to benefit from governmentpurchases.

But beyond the general market expectations there is no sign as yet of a comprehensive policy for infrastructure spending in place though the official intention has certainly come across clearly. The perceived problem with policy making is that there is no cohesiveness amongst the various union ministries involved. The sudden news of the government spending Rs 650 crore for accquiring 10,000 medium and heavy commercial vehicles from Telco and Ashok Leyland gave an indication of this muddled thinking.