MUMBAI, MAR 11: The fall was faster and steeper than expected. Blue chip `old economy' stocks have plunged by an average of 32 per cent in the last 11 days after Finance Minister Yashwant Sinha unveiled his millennium budget. The crash has clearly knocked the bottom out of some of the bluest of blue chips with even government-owned companies getting a severe drubbing in the market. While the fabled Sensex has fallen only 10.19 per cent to 5301 from 5903 on February 29 morning (minutes before Sinha presented the budget), some of the old economy stocks like Reliance, Mahindra & Mahindra and Larsen & Toubro have crashed faster than they rose in the run-up to the budget. The free fallin public sector stocks like BHEL, IOC, HPCL, IPCL and BPCL is also likely to affect the disinvestment and overseas listing plans. Had `new economy' stocks from the information technology, telecom and media stable not withstood the bear onslaught, the market would have crashed further. The loss in market capitalisation - or investors wealth - of nearly Rs 1,00,000 crore from Rs 10,85,000 crore after the budget was contributed by `old economy' stocks. The stock of Reliance Industries, the largest company in the private sector, has fallen by 36.3 per cent to Rs 219 from the February 29 level (before budget announcement) of Rs 344. Ditto is the case with others like Tata Steel, Telco, Hindustan Petroleum and so on. State Bank of India, the largest commercial bank in the country, has seen its market cap falling by a whopping Rs 3,400 to Rs 8,999 crore. The bank's scrip fell by 34.9 per cent to Rs 171 after the budget. Tata Steel, one of the oldest steel companies in India with huge assets, has fallen 32.8 per cent to Rs 92 in the market. HPCL, which owns two refineries, is at the rock-bottom level of Rs 114, a fall of 31.3 per cent. ``Most of these scrips have fallen so steeply that for genuine investors this is the time for bargain hunting,'' said stock-broker Pawan Dharnidharka. Does it reflect the performance of the economy? No, if figures are any indication. Industrial output grew 7.2 per cent in April 1999-January 2000 compared to a meagre 3.8 per cent in the same period a year earlier. Powered by a double digit growth in the crucial manufacturing sector, the index of industrial production (IIP) recorded an impressive growth rate of 9.4 per cent in January 2000 as against 5.2 per cent in the same period last year. Moreover, according to a CII-Ascon survey, many sectors like passenger car sector (43 per cent rise in production in the last six months), medium and heavy commercial vehicles (59 per cent), drugs and pharmaceuticals (16 per cent), processed food (10 per cent), aluminium (14 per cent), air conditioners (10 per cent), ceramics (14 per cent), polyester staple fibre (14.6) and bus and truck tyre (10 per cent) are likely to maintain their production growth during the next six months too. ``This clearly shows that economy is in good shape and fall in share prices is unwarranted. But the market is everything about the future earning potential. The budget has not hit the economy stocks. they are undergoing a re-rating,'' said a fund manager. As like in the US and other markets, the Indian market is also separating old and new economy stocks by giving a thumbsdown to the former. New economy stocks have gained over 20 per cent after the budget. Infosys has moved up from Rs 9,233 to Rs 11,700 in the last 11 days Satyam Computer by 12.36 per cent to Rs 6,150. Others have also showed a similar growth amidst fears of `over-heating' in IT stocks. While investors are counting their losses, one major loser turns out to be the government itself. Public sector BHEL has fallen by 23 per cent to Rs 125. The drop in IOC share price has even forced the government to put off disinvestment in the oil blue-chip to the next year. Dalal Street analysts feel the share fall will also dampen the plan of the government to get a good price for MTNL which is preparing to list its shares on the US markets. The new market trend will certainly hit the disivestment plans. The government who acts as custodians of public wealth cannot afford to lose out by selling its jewels when the market has turned against its `old economy' stocks.
