Market fundas

Corporate results announced over the last 10 days ought to have had investors celebrating like it was Christmas and Diwali rolled into one. ...

int(1)

Corporate results announced over the last 10 days ought to have had investors celebrating like it was Christmas and Diwali rolled into one. Despite the worries over the future of Business Process Outsourcing (BPO), the two Information Technology (IT) icons, Infosys and Wipro, crossed the billion dollar turnover mark and also announced spectacular dividends — 2590 per cent in the case of Infosys and 1450 per cent in that of Wipro. If that were not enough, their bonus declarations — three shares for one by Infosys and two shares for one by Wipro — surpassed everybody’s wildest expectations. This bonanza came on top of several other surprises. Mphasis, another leading IT company, declared a one for one bonus, while Hero Honda delighted its shareholders with a 1000 per cent dividend after its motorcycle sales crossed the two million mark. Gujarat Ambuja, HDFC Bank and Reliance Energy were other major stocks that had declared excellent results.

The good news was not restricted to results. The primary market has done spectacularly well too. In just over four weeks ending March 31, domestic, primary market investors pumped in over Rs 20,000 crore into new issues. Even the forecast of yet another good monsoon, which is ordinarily a hugely bullish factor, did not obviously cheer the markets. There was a 121-point rally in the Sensex on April 13, when Infosys startled even the pessimists and then stock prices quickly sank into relative depression. Then there was a modest rally after the announcement of exit poll results. But the fact is that investors seem to be suffering from pre-election jitters. They are worried that if the NDA does not perform well, the country could be in for another period of instability and confusion over economic policies.

This actually indicates a certain ignorance about political trends. The fact is that there is a fair amount of political consensus on the positives of reform. Not only have the two mainstream political parties, the BJP and the Congress, come out clearly in support of the process, even smaller parties, like the Samajwadi Party, have rolled back considerably their earlier positions against reform. Therefore, the pessimism that seems to occasionally mark market behaviour is both unfounded and misplaced.