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Wednesday, Aug 14, 2002

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Rains revive hopes of pick-up in stock market

Ambarish Mukherjee
Nithya Subramanian

Mr A. P. Kurian

NEW DELHI, Aug. 13

MARKETMEN are drawing cheer from the recent revival of the monsoon, which they say would largely offset the setback due to deficient rainfall in the first half of the season. The current spell of rains, they say, has brightened the sowing prospects for the coming rabi season, which, hopefully, would repair the damage caused by the earlier drought-like situation.

A cross-section of bankers, equity and mutual fund analysts and economic experts Business Line spoke to endorsed the view that the current revival of the monsoon might well be the forerunner for a pick-up in sentiments in the capital market during the second half, even as they cautioned that the general political and economic environment too, would play a crucial role.

The banking industry which has a considerable exposure to the agricultural sector is not really worried.

"There will be some delays in recovery and fresh loans would have to be given. But overall, there is nothing to worry,'' said Mr B. Samal, Chairman and Managing Director, Allahabad Bank.

Mr A.P. Kurian, Chairman of the Association of Mutual Funds of India (AMFI), said that if there were enough rains in September which are crucial for the rabi crops, the impact would be reduced.

However, on the markets, he said that the revival could be delayed as spending on FMCGs and other consumer goods would be lower, thus affecting the profitability of such companies.

According to Mr Mahesh Vyas, Managing Director and Chief Executive Officer (CEO) of the Centre for Monitoring Indian Economy (CMIE): "In July, the stock market, which sends out early signals on the economy's performance, declined by around eight per cent. A large number of corporates could suffer slower growth and lower profits. Therefore, one could expect fiscal 2002-03 to be a difficult year for corporate profits.'' "It is, therefore, logical to expect the stock market to react to the possible erosion of profit margins and profits. Simultaneously, the number of IPOs expected during the year could be lower,'' Mr Vyas said. Mr Prithvi Haldea, Managing Director of Prime Database, said, "Apart from monsoon, there will be host of other factors depending on the political and economic situation that will play determinants. Though IPOs worth around Rs 30,000 crore were in the pipeline, only two -- i-flex and Union Bank - raising around Rs 497 crore have hit the market.''

"If everything remains stable, one could expect IPOs worth Rs 5000-7000 crore during the remaining part of the year,'' Mr Haldea said.

A top NSE official pointed out, that in July, the turnover on the exchange increased by around 47 per cent to Rs 1,79,530 crore compared to Rs 1,22,050 crore in June this year. ''Out of this, delivery in terms of quantity stood at 28.09 per cent in July as against 26.14 per cent in June which means that it is the retail investors who are buying,'' the official said. In value terms, the delivery percentage declined from 17.27 per cent in June to 16.73 per cent in July which implies that the speculators are moving to the sidelines.

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