INDIA INTELLIGENCE REPORT

 

Business & Economy

Stock market growth
sign of good times

What is India News Service, Monday, 14 February 2005, 1200 hrs IST


As stock prices continue to surge and Foreign Institutional Investors (FIIs) remain bullish, India is probably beginning to see the first signs of a growing stock bubble.

The return of the retail investor, especially the large body of new investors in the capital market, is indeed good news. But it would have been even better if these investors showed a greater interest in good fundamental investment, than those who retired hurt after chasing the dreams peddled by scamsters in 1992 and 2001. 

Blue chip stock prices are already overheated because of the scarcity of good investment opportunities, consequently stock operators are finding a ready following when they ramp up dubious mid cap and penny stocks. There is also a quality problem in the IPO (Initial Public Offerings) market for equities, which is why mediocre issues get an exaggerated public response. The average investor is unable to evaluate risk factors in the face of all the hype generated by market intermediaries and institutional investors, especially since the bull market ensures that these IPOs list at a premium to offer price. 

Since mutual fund schemes are considered the best bet for small and relatively uninformed investors, there has been a huge rush to invest in mutual fund IPOs; but this is sending out another set of danger signals. Domestic mutual funds, who were consistent sellers in the secondary market until December 2004 (they sold over Rs 2700 crore when FIIs were relentless buyers), have finally turned net buyers. In 2005, most mutual funds are flush with funds and under pressure to deploy the record mobilisation of their new schemes in the market
.

In conclusion, although there are danger signals, there is good news in the fact that there is no bull operator playing on the scale and brazenness as a Harshad Mehta or Ketan Parekh or with a similar investor following.


Fertiliser
another holy cow of subsidies: It is not often that you see such radical suggestions in a study specially, commissioned by the Finance Minister. But then, the state of fertiliser subsidies is dire enough to drive even the most polite economists to blunt talk.

Auto Industry hopes FM will blink:
The Automobile Industry is looking for the reduction of the excise duty this bugdet. In their recommendation to the Finance Ministry it has asked for a cut excise duty from 24 per cent to 16 per cent.

Top 10 defaulters owe Rs 2,000 crore: The top 10 defaulters to the banking industry have Rs 2,000 crore outstandings against their names, according to the latest data.

Tata's to set up telephony in South Africa: Tata group has acquired a stake in South Africa to develop National Long Distance (NLD) and Fixed Line networks. South Africa's Department of Telecommunications has approved an application by fixed-line networks in the African country.

Gems to shine with Budget sops:
The government is likely to announce major concessions to give a fillip to the gems and jewellery exports in the coming Budget. The industry has emerged as one of the top foreign exchange earners, accounting for over 17 per cent of country's total exports during the previous fiscal. 

Mittal to get \A3 139 m dividend:
Lakshmi Mittal, the London-based NRI steel tycoon, is to get a dividend of about \A3 139 million this year after announcing record profits at his global metals empire.


Companies with captive blocks might get Govt nod to sell extra coal: The Union Government is working on a plan to increase the availability of coal in the country by permitting companies, which have been allocated coal blocks for captive use, to produce in excess of their requirements.
 
Restructuring soon at HLL says Banga: Hindustan Lever Limited (HLL) reeling under near steady decline in profitability, will soon witness a major restructuring in tandem with the parent company Unilever.
 
India-Iran gas pipeline talks on Monday: India and Iran will kick-start a fresh effort to realise the 17-year-old dream project of transportation of West Asian Natural Gas to energy-deficit New Delhi, which is making all out efforts to tie-up its long-term demand of hydrocarbon products for energy security. 

FDI policy needed, says industry: India INC has criticised the government's "piecemeal approach" towards Foreign Direct Investment (FDI) and demanded a clear-cut policy, including a stringent regulatory mechanism and setting up of infrastructural development boards, to raise FDI to five per cent of GDP.

With summer approaching, cos line up `cool' offers: With winter on the wane and temperatures set to rise, India Inc is firming up plans for new product launches, expanding existing ones and chalking out pricing strategies to beat the summer heat.
 
Indus Aviation to start flying academy in India: US-based aviation company Indus Aviation is making an India foray, with plans to set up low-cost flying academy across the country and manufacture sports category aircraft in India.

Indian wins 100 kg gold at Dubai festival: A nine-year-old girl from Kerala has won 100 kg of gold, worth about Rs 60 million in India, in the world\92s biggest gold promotion event at the Dubai Shopping Festival 2005. 

Kashmiri apples stub toe on bad weather: Last year\92s apple crop was of a low quality, even though official figures show that the quantity of produce was greater than in 2003.
 
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