May Day makes it early to market

<div class="section1"><div class="Normal">May Day arrived early at the stockmarket, on April 26, when spooked by exit poll results the Sensex dropped 213 points to 5,712. Suddenly investors were petrified of the impact on economic reforms should election results throw up an unstable coalition. That is one in which the largest supporting faction, were it to leave, would cause a collapse.The Sensex ended the week down 270 points, at 5,655.<br /><br />The impact of good corporate results did nothing to negate the adverse sentiment caused by psephological predilections. RIL declared a profit of over $1 billion, with both petrochemicals and petroleum businesses contributing. The stock dropped from Rs 568 to Rs 529!<br /><br />Gail''s profit for the year, at Rs 1,878 crore, would have been higher by another Rs 428 crore (28 per cent) were it not asked to share the burden of subsidy on LPG and kerosene which belongs to the government. This is both obfuscatory and foolish. Obfuscatory because it conceals the true fiscal hole the government is in by loading companies like ONGC and Gail with a burden that is no business of theirs. Foolish because, by thus reducing Gail''s profits, the government reduced the value of the company, of which it recently divested 10 per cent. And thus its own collection through the divestment.<br /><br />One hopes the next government would take steps to phase out such subsidies or at least not burden companies with public shareholding with them, for providing such subsidies is a political decision. It is in such matters that the market gets concerned about the fate of continuing economic reforms. <br /><br />Good results were declared by banks, of which perhaps, Q4 performance of Corporation Bank (profits up 152 per cent), ICICI Bank (up 64 per cent) and UTI Bank (profits up 44 per cent) were commendable. Despite lower trading profits, which were cause of concern, banks managed to show profit growth and reduced net NPAs. Share prices remained steady. Stock prices have not responded to the good corporate results, and have either dipped or remained steady. This presents a buying opportunity especially if election results, due on May 13, remove causes for an overly pessimistic outlook on the stability of the coalitional government.<br /><br />What is worrying is the likelihood of a hike in US interest rates, now that fear of deflation has, according to Greenspan, been conquered. And the impact of the slowdown in China. One should take a call on the results of the poll on May 13 and buy into this correction.<br /><br /><formid=367815></formid=367815></div> </div>