Worst Over For Corporates

This should lead to higher price earning multiples, unless the market rewards high payouts, in which case the incentive for investment and future growth will diminish.

The brighter outlook for the future is reflected in a study by Ficci. It has matched the expectations of members in various industry segments with fairly rational assumptions on the money supply and inflation and concluded that the fall in the growth rate of industrial output is bottoming out and the upward trend will resume from the second quarter of the current financial year. Overall, it expects the current year to be one of broad-based revival and 1998-99 to see reinvigorated growth.

A lot hinges on the resumption of investment, which alone can raise the prospects of the steel and cement industries. Businessmen, enthused by the budget, have been gladdened by the fall in interest rates, and implicit in their optimism may be an expectation that the capital market will also revive. There has indeed been a renewal of interest in well-performing mid-cap companies, indicating that the markets focus only on the blue chips is over. But it is also true that share prices are unlikely to go up across the board. Businessmen who say they expect investment to pick up must have done their own sums on where the money will come from. In fact, Indian business houses are in the throes of restructuring, getting out of non-core areas and concentrating future investment only in those where they are dominant or very competitive. The Business Standard reported yesterday on how several conglomerate flagship scrips have underperformed the market and how the AV Birla group, a key non-performer in 1996-97, is

planning drastic refocusing. Thus, if businessmen feel the future looks bright, it is in part because they also feel that they are learning the right lessons.