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Indian shares to crawl on budget caution

BOMBAY: Caution ahead of India's February 29 budget, which is expected to take tough measures to rein in a rising fiscal deficit, will restrain investors this week and dampen share movements, dealers said.

Participants will also watch for the outcome of a Tuesday meeting of markets regulator Securities and Exchange Board of India, which is set to consider expanding the list of securities to be traded in rolling settlements.

"The Bombay Stock Exchange index should move in a 250-point range, to 5,450 on the higher side and 5,200 on the lower side," said Ketan Desai, head of research at Asit C. Mehta Investment Intermediates.

The 30-share index lost 0.41 percent or 22.21 points last week to end Friday at 5,313.59.

India started rolling settlements in a T+5 cycle on its exchanges in 10 stocks in January.

These settlements are made on the fifth working day after the trade, as opposed to the usual weekly settlement in which deals made on any day of the week are settled together a week later.

"Liquidity in the 10 stocks has already taken a beating," said Kuntal Shah, chief dealer at D.T. Gandhi Securities.

Dealers said speculator activity in these scrips had dropped dramatically.

"In the absence of liquidity, not many institutional investors are also interested in the stock," said Shah.

Finance Minister Yashwant Sinha has already said his February 29 budget will be harsh as his government has no soft options.

Analysts said the government will have to take tough steps to reduce its high fiscal deficit, which they estimate at eight to nine percent of the Gross Domestic Product (GDP), considering the deficits of the federal and state governments and the losses of public sector units.

Sinha was quoted at the weekend as saying GDP was likely to expand more than six percent in the fiscal year to March 2000, compared with 6.8 percent GDP growth a year earlier.

"There are concerns about the fiscal deficit and the fact that the government's disinvestment programme has not really been on target," said Desai.

"With the earnings season behind us, the market is going to speculate on the budget possibilities in the next three weeks," he added.

Foreign funds have been selective buyers and market participants do not expect them to step up their buying till after the budget.

Information technology stocks will stay popular, dealers said.-Reuters