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Indian shares seen lower, techs in focus

BOMBAY: Fears of a tough federal budget and disappointing third-quarter earnings will sideline most investors in Indian shares this week but analysts said infotech stocks are expected to shine as local funds step up buying.

Analysts said expectations of a tough budget in late February and high net outstanding positions were likely to deter investors from buying more shares at present.

Investors would also keep an eye on markets in the United States and the outcome from this week's Federal Reserve policy-setting meeting. The Fed is widely expected to raise interest rates this week after economic data pointed to a booming U.S. economy and mounting inflationary pressures.

Wall Street fell sharply on Friday with the Dow Jones Industrial Average dropping 2.62 percent and the Nasdaq composite sliding 3.78 percent on fears of strong Fed action to slow the economy.

"The market should be quite dull this week, with the exception of infotech stocks," said Ashish Mehta, director at local brokerage Mehta, Vakil and Co.

"People are quite disappointed with the financial results of most cyclicals, so the index should not be going anywhere," he said.

On Friday, the top-30 share Bombay Stock Exchange (BSE) index ended at 5,335.80. For the week, it fell 1.60 percent.

Except for a few firms like State Bank of India and Grasim Industries, earnings of most other index-linked firms, especially in the cement, engineering and pharmaceutical sectors, were below expectations, analysts said.

They said the 2000/01 (April-March) budget, to be unveiled on February 29, would now take centre-stage and drive sentiment.

India's Finance Minister Yashwant Sinha said last week he expected gross domestic product to grow eight percent in fiscal 2000/01 and said tax reforms were necessary if the economy were to grow at that rate.

The market expects the government to take some tough decisions to contain fiscal deficit.

"There will be some unwinding ahead of the budget, it will make room for a rally after the budget," said a dealer with a foreign brokerage.

Net outstanding positions at the BSE stood at 37.52 billion rupees on Friday compared to about 33 billion at the beginning of January.

Dealers said local institutions, which have launched dedicated information technology funds, will step up buying of infotech stocks.

Foreign funds have bought a net $14.6 million worth of equities in January till Thursday, figures from the market regulator show. They were net investors of more than $1.5 billion in 1999.

Among key firms releasing results this week at the end of the reporting season are Mahanagar Telephone Nigam Ltd, Mahindra & Mahindra, Indian Petrochemicals Corp and Videsh Sanchar Nigam Ltd.-Reuters