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Tuesday, May 25, 2004

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Marketmen prefer to be cautious — Amidst `Chidambaram honeymoon'

Veena Venugopal

Mumbai , May 24

EVEN though BSE gave Mr Chidambaram a 161-point salute on Monday, evidently champagnes are not being uncorked yet. The new Finance Minister's past record is a relief but the wounded markets prefer to remain stoic about the future.

The market is enthused about the `Manmohan Singh - P. Chidambaram combination', but this equation is fairly tempered by concerns about both the Left front's roadblocks on progressive reforms and the Congress' inexperience in managing coalitions.

``We have to be more cautious while making investment decisions now. The markets could head for a lot more downfall in the next few days, as there are still policy level concerns. Let's not get carried away by the euphoria of the ministry allocations,'' said Mr Rajeev Gupta, Fortune Financial Services.

These policy level concerns have had many sector specific impacts in the market.

Despite Mr Chidamabaram's reputation as a reformer who is open and inclusive, concerns over disinvestments of public sector units remain.

All rallies in PSU scrips have been met by profit booking. Brokers concede that not having a disinvestment ministry is a big disappointment.

``PSUs have to be bought for their stand-alone stories,'' said Mr Jamshed Desai, Head of Research, IL&FS Investsmart.

Information technology, always perceived as politics-insensitive, is back to being the favourites of the bourses. Sector wise allocations have changed in view of the new Government and Mr Chidambaram taking over as the Finance Minister has not significantly impacted the negative perceptions attached with some of the sectors.

``The chinks in the coalition are already visible with DMK's demands, Left Fronts' statements, etc. This would force the market to substantially dilute the euphoria of Mr Chidambaram taking the country forward. He is not likely to be left on his own and all attempts at reforms would be questioned, debated and delayed,'' said an institutional broker who did not wish to be named.

Markets, having been bitten once by the unexpected routing of the NDA, are now reluctant to take anything for granted.

The common minimum programme would be step one, but what is expected to show a definitive path to the bourses would be the budget, according to brokers.

``There would be many shocks between now and the budget,'' said Mr Damani.

``Today was clearly a Chidambaram honeymoon in the market,'' says Mr Ramesh Damani, BSE broker.

The million-dollar question the stock market is now asking is about how long this marriage will last.

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