The Hindu Business Line : `Stock market crash a passing phenomenon'

THE corporate growth story is intact and the mauling witnessed by the stocks in the aftermath of Parliamentary elections is only a passing phenomenon, according to a senior executive of Motilal Oswal Securities Ltd (MOSL).

He also feels that the foreign institutional investors will remain invested in the Indian capital markets, despite fears of India losing FII investment because of the changed political combination in power at the Centre, since the economy is strong.

Mr Jitendra Panda, Vice-President (Retail Broking), MOSL, Mumbai, told Business Line that he felt the economy is `very strong' because India is `young,' which would ensure that the GDP would be strong as well.

India's strength in the BPO sector would help this youthful population to have a good surplus income that would drive the economic growth. He believed that the Indian BPO success story would be a long-term one. India has a large pool of young educated manpower and the world needs us.

On whether the sharp downturn witnessed by the stock market in the past one month was justified, he said the poll outcome was certainly a `shock.' No media, no analyst could predict correctly the poll outcome and none thought Dr Manmohan Singh would become the Prime Minister, though he is a very capable person.

"When there is a shock, there is a reaction and the market behaviour is a reaction to that shock which normally occurred."

He said this was a `passing phenomenon' and drew attention to the market fall after the bomb blasts in Mumbai. But this was a temporary phase and pointed out that nothing has happened to the profitability of companies.

Asked about the sectors about which he was bullish, Mr Panda said the software sector to do well because the BPO story was becoming stronger. In the long term, software, automobiles and pharma would be the core sectors to do well.

On the wish-list of the capital market from the Budget, he said the market wanted the Government to come out with `clear policies' to drive economic growth. Answering a question about the FIIs' perception of remaining invested in India, he said they were very positive on India's growth story since the economy was very strong and they were taking a long-term view.

On whether the FIIs would give the same weightage to investment in India as earlier, he said the `weightage is directional' in that it was indicative and was never followed in toto by anybody. It may change a little bit depending on the Budget and monsoon behaviour. If both were good, the weightage may increase `dramatically'.

On whether the market was willing to digest any shift in Government focus from industry and capital market to agriculture and rural development, Mr Panda said the Finance Minister, Mr P. Chidambaram, was well aware of the needs of the industry and the Government would take a balanced view of the needs of all sectors. He expected the capital market sops announced by the previous NDA Government to continue.

Mr Panda said his company, which has a strong retail focus, planned to open 50 to 60 offices during the current fiscal. At present, it has presence in 110 cities across the country, of which nearly 10 per cent is in Tamil Nadu, including its own offices and offices of business associates.

For small investors, trading was not a healthy option and the company had advised them to invest their money in equities of blue chip companies. With rising inflation, equity investment presented a good option to beat inflation, particularly when administered interest rate regime was being dismantled.

He said in the last one year, the number of clients of Motilal Oswal had doubled to 25,000-30,000 and the daily business volume comprising both equity and derivatives trading had gone up by eight to 10 times.