Young Investor

Markets in a minute

RAJALAKSHMI SIVAM | Updated on February 26, 2011

The run up to the Budget has been quite scary so far. After all, the Sensex had sunk by about 510 points over the week! Here's a slice of the conversion that took place in the studio:

Ajay: Why is this happening to the market? We saw 510 points shaved-off from the Sensex on Thursday. Is it just pre-budget tremors? Or is there something more to it?

Swati: The market is speculating about quite a few things. Foremost is about the government's action to axe inflation. There are fears that such moves may hamper corporate growth.

Ajay: With state elections around the corner, it will no-doubt be only a people-friendly budget… It is the only trump-card the Centre has in its hand now to regain the lost confidence of the people.

Swati: The pressure on the market is to an extent also from the negative developments in West Asia. You would have seen how Dubai's Bellwether index took a beating

Ajay: Yes, I did... and here it was the Punj Lloyd stock that fell prey to the negative sentiments of market-men. The company has high exposure to Libya.

Swati: Right, there was a lot of speculation about companies that had exposure to MENA countries…

Ajay: MENA?

Swati: Hey, it is a reference to the Middle-East and North African countries. I saw Voltas' management on one of the television channels explaining why their order book was protected despite their exposure to MENA countries. The company actually has no exposures to Libya at all, they have major exposures only to Oman and Saudi Arabia.

Ajay: Actually, with crude oil at above $100 a barrel, there should be better order inflows now from UAE, isn't it?

Swati: Logically, yes… but one just has to keep fingers crossed and see the developments. The fear that the unrest may spread to neighbouring nations is what is pulling down all stocks that have Middle-East exposure.

Ajay: When talking of oil, I should say that RIL investors actually had some good news this week - with that BP deal, did you see? BP is taking a 30 per cent stake in RIL's 23 Indian oil and gas blocks.

Swati: Yeah, actually Moody's raised RIL's local currency rating to positive from stable after this deal. The deal is a good pep to RIL's financial metrics.

Ajay: SBI also came with some sweet news - it announced its plans of merging five of its subsidiaries with itself. Though SBI didn't see price reactions to this news, its three associate banks - State Bank of Travancore, State Bank of Mysore and State Bank of Bikaner and Jaipur did crawl up on Wednesday, following good buying interest.

Swati: The market's anxiety will come to an end on Monday. Let's hope the budget gives a positive boost to sentiments in the market.

Published on February 26, 2011

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