The Hindu Business Line : Pharma, power seen as investor favourites

A FICCI (Federation of Indian Chambers of Commerce and Industry) survey on the state of capital markets shows that the pharmaceutical and power sectors will be the most favoured sectors by investors in the coming years, while there will be decline in FMCG scrips.

Almost 76 per cent of those questioned believe that pharmaceutical and power scrips would rise in the future.

Indian pharmaceutical manufacturers are one of the lowest cost producers of drugs in the world. With a scalable labour force, Indian manufacturers can produce drugs at 40 per cent to 50 per cent of the cost in the rest of the world. In some cases, this is as low as 90 per cent.

The respondents said, with the coming of the Electricity Act 2003, the power sector, which was highly regulated with several licensing requirements, is in the throes of change.

Apart from pharmaceutical and power sectors, those surveyed showed preference for cement and IT scrips. Almost 73 per cent of the respondents favour the cement sector, while 70 per cent bet on IT.

The Indian cement industry, with a total capacity of 144 million tonnes in the financial year 2004, has surpassed nations such as the US and Japan to emerge as the second largest market after China. According to the survey, the infrastructure-related initiatives of the Government and the boom in the housing sector due to growth in housing finance are said to be the main drivers of development of this industry.

The survey points out that after a phase of consolidation, the IT sector was looking up again. The latest quarterly results of major IT companies have exceeded the market expectations, the survey shows.

Almost 49 per cent of the respondents expect a rise in the stock prices of the telecom sector, while 46 per cent expect an upward movement in the steel sector.

In the FMCG sector, about 59 per cent of those surveyed expect a dip in the stock prices in the coming year. Steep rise in input prices and persistent sluggish demands are the factors exerting pressure on the margins of FMCG companies, the respondents said.

The survey also indicates that 77 per cent of the respondents expect the BSE Sensex to hover in the range of 5,000-6,000 in the next three months.

The respondents stated that India would be one of the most sought-after investment destinations for foreign investors in the coming years.

Pointing towards the problems in the capital market, the respondents said that multiplicity of regulators is one of the flaws in the market, besides low investor confidence and lack of liquidity and depth.

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