Government stocks, which were market favourites till last week, have become the whipping boys on the stock markets. State-run Mahanagar Telephone Nigam Ltd (MTNL) fell by 9 per cent, or Rs 10.50, to Rs 120.25 after the media reported over the weekend that the firm might be merged with state-run telecom major Bharat Sanchar Nigam Ltd (BSNL).The oil ministry bid to derail divestment in oil companies and the entry of Defence Minister George Fernandes against divestment in stocks like HPCL and BPCL prompted investors to sell out. In fact, the combined market capitalisation of BPCL and HPCL declined by Rs 1,430 crore in the last five sessions. While BPCL market capitalisation fell by Rs 807 crore to Rs 7,843 crore, HPCL’s declined by Rs 623 crore to Rs 8,937 crore. On Monday, HPCL fell by 10.35 to 263.40, BPCL by 13.30 to 261.45, IOC by 6.80 to 236.20 and BEL by 6.60 to 194.60.“Reports that the government planned to bring unlisted BSNL and listed MTNL under one umbrella prompted investors to unload MTNL stocks,” said a dealer, adding that MTNL slumped to a seven-month low on concerns that the proposed merger could derail MTNL’s privatisation plans, which was a key trigger for the stock. “We believe the merger plan could be negative for MTNL shareholders as it would impact valuations and quality of earnings,” said a telecom analyst with a domestic brokerage.According to brokers, the strong lobby against divestment in oil companies is dampening the sentiment in their scrips. “Apart from corporate rivalry, now ministers are also divided into pro and anti-divestment camps. There is total uncertainty about divestment in oil PSUs now,” said BSE dealer R.A. Podar.Meanwhile, the government-backed financial institution Industrial Finance Corporation of India (IFCI) surged on markets, boosted by Finance Minister Jaswant Singh’s assurance to rescue the troubled companies. IFCI jumped the maximum permissible 20 per cent to Rs 5.60 and IDBI vaulted 7.9 per cent to Rs 20.45. Singh said on Saturday he will announce a bailout scheme for the two institutions after he unveiled a rescue package for the country’s biggest mutual fund—the Unit Trust of India.
