20000306

Indian shares' budget blues to fade away this week

BOMBAY: Indian shares were expected to consolidate this week as investors hunt for bargains in several sectors which were battered by initial disappointment with the new national budget, analysts said.

The market's recent bull run was violently reined in on Tuesday when Indian Finance Minister Yashwant Sinha announced tax concessions on export earnings would be phased out and tax rates on dividends paid by companies doubled to 20 percent in the budget for the fiscal year March 2001.

The benchmark Bombay index fell nine percent on budget day from its intraday high. The index ended on Friday at 5,378.27, down 4.35 percent or 244.81 points on the week.

But technology stocks stood tall among the ruins and recovered strongly as investors realised the negative impact of the budget proposals would not be as bad as initially feared.

Some analysts expected a recovery in other sectors to follow this week.

"The imbalance between technology shares and those of other sectors after the budget should get corrected," said U.R. Bhat, chief investment officer at Jardine Fleming India Asset Management.

"We should see value-based buying," he said.

Software major Infosys Technologies Ltd ended the week at the upper end of the eight percent circuit limit at 10,965.20 rupees.

Buying in Infosys was triggered by Thursday's 6.80 percent gains of its American Depositary Receipts (ADRs) listed at the Nasdaq and a five-year deal with British retailing chain Sainsbury's Supermarkets Ltd, valued at 28 million pounds (1.93 billion rupees), dealers said.

Infosys' stock in New York surged by nearly another nine percent on Friday as U.S. stocks climbed after a report on February unemployment and wages showed no signs of inflation.

Sustained buying of Indian stocks by foreign funds and a clearout of speculative long positions were also considered healthy signs for the market's prospects, dealers said.

The budget also proposed raising the cap on foreign institutional investors' stakes in Indian companies to 40 percent from 30 percent.

Data from India's markets regulator showed foreign institutional investors (FIIs) were net buyers to the tune of $86.3 million in the first two days of March and $619.8 million in the whole of February.

Outstanding long positions on the BSE fell to 36.55 billion rupees on Thursday from 43.68 billion a week earlier.

"A lot of Indian shares are very attractive at these levels, especially in the cyclical and pharmaceutical sectors. Buying in these should keep the markets strong," said Jatin Sarvaiya, managing director at Triumph International Finance India Ltd.-Reuters