Sensex Could Touch 5,000-Mark, Says Taraporevala

The Bombay Stock Exchange (BSE) Sensex could touch the 5,000-mark this year under best conditions, said economist Russi Jal Taraporevala while delivering the 33rd annual lecture on `Implications of the Union Budget 1997-98 on the Capital Market.

This would of course happen under the best conditions of the political and economic environment of the country and under these conditions the lower level would be 4,100, he added.

According to Taraporevala, under the worst conditions the Sensex would oscillate between the 2,900 and 3,800 levels and a medium environment would see the Sensex moving between 3,500 and 4,400 levels.

Hailing the recent Union budget presented by finance minister P Chidambaram as `better than any previous budget he has ever seen, Taraporevala said that the long-term political climate in the country seems to be hazy. Some of the salient features of the sectoral analysis are given below:

 

Cements: The short-term outlook is gloomy. The second half of 1996-97 would be worse than the first half as supply would far exceed demand all over excepting the Southern states. The increased costs pertaining to railway freight and fuel would prove to factors behind the decline. Long term outlook may be good in this sector.

Steel: The second half of 1996-97 may be worse than the first half as supply would exceed demand. Also faced by cheap imports, this sector would witness stiff competition. Revival of demand would take time.

Man-made fibres: Prices of PTA, DMT are coming down and supply to exceed demand even after three years. While the sector has witnessed an expansion of demand for polyester filaments, nylon has become obsolete and a shift has taken place from viscose filaments and fibres to polyester filaments. Fertilisers: Imports would move up substantially and demand would exceed supplies. This sector is expected to grow at 12 per cent of net assets.

Petrochemicals & plastics: With international prices are coming down, domestic companies would face a squeezing of margins and small producers would face a sharp decline in profits.

Pharmaceuticals: This sector has been witnessing a 20 per cent annual growth despite a price control effected by the government. MNCs are bringing in patented drugs and the sector faces excellent prospects for growth.

Automobiles: Supply would far exceed the demands. In the small vehicle sector, exports have to be attempted. Hike in diesel prices would affect trucks, and two and three wheeler segment would witness a slowdown.