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March 4, 2000
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Brave new worldAravamuthan Sasikant The Y2K Budget has only reinforced the stark polarisation that has taken place in the last six months in the stock market. At one end are ICE (infotech, communication and entertainment) stocks which continue to hit the roof and at the other the rest of the market which receive a drubbing every day. One operator divides the market as ICE and non-ICE. He adds, "Non-ICE stocks are out unless and until there is an e-commerce story." Walk into the Bombay Stock Exchange at Jeejeebhoy Towers and the only tips changing ears involve ICE stocks. Fund managers and investors continue to exit the old economy stocks. Yesterday's darlings, pharmaceuticals and fast moving consumer goods, have been replaced by communication and entertainment in the golden triangle while infotech still rules. The main reason for this polarisation is the impetus given in the Budget for 'Intellectual Capital-based industries,' while other sectors were ignored. Of course, analysts say the hype is also responsible to some extent. Four important announcements in Budget 2000-01 favour ICE stocks over old economy scrips.
Against this backdrop why should one go for cyclical and FMCG stocks that grow at less than 15 per cent? Compare this to the software sector that promises a minimum 50 per cent growth for the next two to three years. A large domestic broker says, "Investors are not only putting fresh funds in ICE but also shifting funds from cyclicals." Most FII investment in the recent past has gone into these three sectors. FIIs have brought in $ 846 million so far this year and a dealer at a foreign stockbroker estimates 80 per cent of it is in ICE stocks. With raised limits, they can buy more ICE scrips. Even in the recent past, they have divested from FMCGs first and now pharma in favour of ICE stock. Just three months into this year and the FII investment so far is more than half of last year's total investment. Seeing this trend and the Budget's treatment to manufacturing, the polarisation is likely to continue for the next three to six months -- a long time for the ICE to melt. |
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