India shares jittery over economy, US woes

Index-heavyweight technology shares, which are prone to price swings in the US markets, are expected to lead the fall.

The US Nasdaq index fell 5.35 per cent on Friday, to its lowest close for the year after a weak sales outlook from Dell Computer Corp DELL.The tech-laden index has fallen 12.2 per cent on the week and is down more than 25 per cent year-to-date.

The 30-share Bombay exchange index finished flat at 3,941.13 points last week, falling over two per cent on Friday, after breaching 4,000 mid-week for the first time in nearly a month.

"The market had appeared to be recovering in the past couple of weeks, but I see it catching up with the Nasdaq weakness fast," he said.

Most of the recovery was based on bargain hunting by funds after nearly two months of weakness and aided by some short covering by speculators. But investments henceforth are likely to be very selective, across sectors, fund managers say.

Lingering uncertainty over who will become the next US President is expected to drive foreign funds to the sidelines this week, analysts said.

It may be at least a week before the winner of the election is confirmed. Some ballots are being recounted in the key state of Florida and legal challenges are mounting.

Net foreign fund flows into Indian stocks turned a positive $214 million during November 1-9, but there were signs of slowing towards the end of last week.

Foreign funds were net sellers of $50.1 million in the previous two months.

Slowing Economy

Government data released on Friday reinforced analyst concerns about an overall economic slowdown. India’s industrial production growth dropped to 5.4 per cent in the first half of 2000/01 (April-March), from 6.4 per cent in the year-ago period.

Independent think-tanks and the central bank had earlier cut their gross domestic product (GDP) estimates, following patchy monsoon rains which are expected to hit India’s agricultural economy and the industrial slowdown.

The latest data is expected to dampen old economy shares, which had risen in the past week on bargain hunting.

"We believe only the technology stocks could provide forward momentum," said Shekhar Sathe, chief executive officer, Kotak Mahindra Asset Management Ltd.

A Reuters survey last week of 14 software companies showedprofits had risen 131 percent on average for the three months ended September, and the sector is expected to maintain growth rates helped by high margin Internet and E-commerce revenues.

Divestment Blues

Dealers say shares of state-run firms, in which thegovernment intends to divest its holdings, are likely to be in focus this week.

"There is a growing feeling that the government may speedup the disinvestment process," said a dealer with local brokerage. "Investors are picking up shares of most likely disinvestment candidates in anticipation."

Mahanagar Telephone Nigam Ltd, which is the leading fixedline telephone operator in Bombay and Delhi and an Internet access provider, gained 6.8 percent last week to 170.55 Rupees.

Another state-run Bharat Heavy Electricals Ltd gained 11.4percent to 125.15 Rupees.