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Rediff.com  » Business » S&P shrugged off, Q3 sanguinity prevails

S&P shrugged off, Q3 sanguinity prevails

By Anusha Subramanian & Rakesh P Sharma in Mumbai
January 10, 2003 16:30 IST
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The equity markets are unfazed by Standard & Poor's move to reaffirm India's junk rating and negative outlook and are, in fact, looking forward to a better third quarter corporate earnings.

Vipul P Dalal, chief operating officer (institutional sales) at Investsmart India, said, "We see no negative impact (of maintaining the rating) on the stock markets, more so on account of the high forex reserves."

"Further, foreign institutional investors are unlikely to stay away as the markets are set for a boom, especially with economy and corporates showing robust growth," Dalal added.

He also said that FIIs hold stocks worth $14.3 billion, purchased under the portfolio investment scheme.

Deven Choksey, managing director, K R Choksey, said, "There will be no direct impact on the capital markets as both macro and micro economic fundamentals are taken into consideration. And at this point in time, the micro economic fundamentals look robust."

"Many sectors have maintained a sequential (quarter-on-quarter) growth of over 10 per cent and the economy has also maintained a growth rate of 6 per cent. The third quarter as well as fourth quarter earnings forecast should prove positive for the markets," he added.

Other analysts echoed similar views. Jignesh Shah, senior investment analyst with ASK Raymond James adds, "The Indian sub-continent has not been affected drastically by the global and mainly the US recession. The economies in this region are looking up. Moreover, the strength across all Asian currencies shows optimism for the future. Keeping these factors in mind, I do not expect FIIs to shy away from the market for reasons such as the S&P rating and other minor negative factors."

"Frankly, I think it is a non-event for the markets which have been upbeat," adds Sunil Singhania, director, Advani Shares & Brokers.

"The market is waiting for some fund-based buying to build on the upbeat prospects for corporates and the economy," he added.

The general feeling among analysts is that third-quarter earnings (for the quarter ended December 2002) are set to dominate January stock movements.

They said India was among the few global markets to end 2002 with gains. With the economy showing robust growth, and the forex reserves touching record highs, 2003 could be the year of the return of the investor. The immediate trigger would be the January's earnings' season.

The sectors that investors need to look out for is information technology and banking, feel analysts.

As for banking, Choksey said, "The valuations and dividend yields of this sector look very attractive. Moreover, with the entry of Reliance Infocomm, the offtake of retail credit is going to be between Rs 5,000 crore (Rs 50 billion) and Rs 10,000 crore (Rs 100 billion). While this is one trigger, the other is that with the Securitisation Bill having been passed, banks are now in a better position to recover their sticky dues."
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Anusha Subramanian & Rakesh P Sharma in Mumbai
 

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