Sagging Indian markets look to Clinton for support

Sagging Indian markets look to Clinton for support
George Mathew

MUMBAI, MAR 17: The impending visit of sultan of capitalism to the sub-continent has not set the Indian markets on fire. Indian stocks, which tumbled by 13.56 per cent in the last fortnight after the Union budget, do not seem to be ready for a warm welcome to US President Bill Clinton. While the bellweather Bombay Stock Exchange Sensex fell by a whopping 147 points to 5102 on Thursday -- the last trading day before Clinton arrives in New Delhi on Tuesday -- analysts don't rule out a strong rally to greet the US president when the markets re-open on Tuesday.

Punters are hoping that the arrival of Clinton will give a new lease of life to the battered stock markets. The fancied index has fallen by 800 points after Union Finance Minister Yashwant Sinha presented the first budget of the century on February 29. Thus, the Clinton visit will coincide with some bargain hunting by investors who are now exploring the wreckage created by technology, media and telecom shares.

Contrast this with the Pakistani markets. Pak stocks vaulted above the 2,000 points barrier on Thursday in speculative retail buying ahead of the one-day visit of Clinton. The Karachi Stock Exchange 100-share index rose 53.40 points, or 2.74 percent, at 2,001.96 points in shortened trading session ahead of holidays for the festival of Eid-ul-Adha.

India gives a different picture. ``The two holidays -- Friday and Monday -- forced investors to cut their positions as the BSE's weekly settlement ends on Friday and the National Stock Exchange on Tuesday. On top of this, the hammering in technology and telecom shares has pushed the market further into the negative territory,'' said BSE broker Pawan Dharnidharka. Ever since the Sensex touched the all-time high of 6150 on February 14 this year, the index has been falling and even briefly fell below the 5,000 mark early this week.

Pawan says the pattern followed by the US and European markets is being repeated in India as well. ``Old economy shares which were pummelled by investors earlier are staging a comeback while technology, media and telecom shares are going down,'' he said. Technology stocks like Infosys, Satyam and Wipro have fallen by nearly 25 per cent in the last one week. On the other hand, `old economy' stocks like Reliance have recovered by around 10 per cent. State Bank which crashed to Rs 165 from Rs 246 has now recovered to Rs 199.

Not all punters believe that Clinton will send the Indian market into the bull orbit. ``There is already a talk that Clinton's visit is like a picnic. It has not promised any relaxation in the curbs imposed after the Pokharan blasts. There is no indication of any major tie-up or investment proposal as part of the visit. Moreover, as Clinton's term as President is coming to an end, one is not sure what he can do after the visit,'' said a Dalal Street analyst.

However, there is no second opinion that Clinton's visit will put the spotlight on India, which can be highlighted to show the country as an excellent investment destination. Dalal Street will not be surprised if FIIs step up their operations and bring in more dollars and take Sensex up by at least 500 points.

Even foreign institutional investors (FIIs) have of late become sellers in Indian markets. On Wednesday alone, market regulator Sebi's FII investment figures show a net outflow to the tune of Rs 163.5 crore (around $ 37.5 million). This is in sharp contrast to the trend in February whens FIIs invested a record $619 million. ``This outflow is not restricted to India alone. There has been a fall in FII investment in Asian markets in the last one month,'' said a Hong Kong based fund manager.

Indian fund managers have already given indications of a strong rally when Clinton lands in India. PS Subramanyam, chairman of UTI, India's largest mutual fund with assets of over Rs 67,000 crore, has gone on record saying Indian stock makets and cyclical shares are underpriced and the markets would go up in the coming days. ``The market has bottomed out in the last couple of weeks and is now headed for a upward technical correction,'' he said after launching the broking subsidiary of Over-the-Counter Exchange of India in Mumbai.

Bulls are eagerly waiting for the Big C's arrival. It remains to be seen whether the event will lead to a big bull rally.