05-14-2004, 10:20 PM
<b>Sensex slumps 330 pts on divestment threat</b>
Reuters
Mumbai, May 14
Indian shares slumped over six per cent on Friday as investors worried privatisation and foreign investment could be hit by a shift to a leftist-backed Government following the surprise election victory of the Congress party.
The slump in the Bombay 30-share index -- Sensex was led by selling in state-backed firms and banks, such as ONGC and State Bank of India. The Sensex ended down as much as 329.60 points to 5069.87. The Indian rupee fell half a per cent against the dollar.
The fall in shares extended a selling trend over more than two weeks, in which the Bombay index has tumbled 14 per cent since it became clear the pro-reform National Democratic Alliance (NDA) might not fare as well as had been expected in the election.
Congress and its allies, including some on the far-left, stunned pundits with a commanding victory and were trying to form a new Government on Friday, prompting the latest sell-off.
"It has reached a situation where people have given up hope. They have lost heavily," said managing director of Dimensional Securities, Ajit Suarana.
"But, I think it is being overdone and people should use this as a buying opportunity. Just because privatisation may not go through, doesn't mean the country will come to a halt."
India is Asia's third-largest economy.
Confirming the fears of many investors, the country's largest communist party described India's privatisation ministry as "unnecessary".
Congress says it will continue with privatisation, but only "selectively", and will not sell profit-making state companies.
"Clearly, the privatisation story is over for now," said director of Kotak Mahindra Asset Management, C Jayaram. "And the big India story, which was popular among foreign investors, will lose some its appeal."
The share slump knocked half a per cent off the value of the Indian rupee, which had gained gained five per cent against the dollar in 2003 as record levels of overseas money flowed into India.
Among those shares hardest hit were companies in which the NDA government had announced plans to sell a strategic stake.
Refiners Hindustan Petroleum Corp and Bharat Petroleum Corp Ltd both dived 13 per cent, while Shipping Corp of India, the country's biggest shipping line, lost 17 per cent to hit a nine-month low of Rs 86.70.
Shares in ONGC, the country's top oil producer, in which the Government sold a record $2.3 billion worth of shares in March, dropped 11 per cent to Rs 731.40.
Foreign funds have sold a net $365 million worth of Indian shares in seven straight trading sessions through Wednesday.
<b>Banks were also hit on expectations crucial sector reforms will be delayed or shelved</b>. State Bank of India, the biggest commercial bank, slumped 14 per cent to Rs 516.9 and Punjab National Bank plunged 18 per cent to Rs 263.50.
Reuters
Mumbai, May 14
Indian shares slumped over six per cent on Friday as investors worried privatisation and foreign investment could be hit by a shift to a leftist-backed Government following the surprise election victory of the Congress party.
The slump in the Bombay 30-share index -- Sensex was led by selling in state-backed firms and banks, such as ONGC and State Bank of India. The Sensex ended down as much as 329.60 points to 5069.87. The Indian rupee fell half a per cent against the dollar.
The fall in shares extended a selling trend over more than two weeks, in which the Bombay index has tumbled 14 per cent since it became clear the pro-reform National Democratic Alliance (NDA) might not fare as well as had been expected in the election.
Congress and its allies, including some on the far-left, stunned pundits with a commanding victory and were trying to form a new Government on Friday, prompting the latest sell-off.
"It has reached a situation where people have given up hope. They have lost heavily," said managing director of Dimensional Securities, Ajit Suarana.
"But, I think it is being overdone and people should use this as a buying opportunity. Just because privatisation may not go through, doesn't mean the country will come to a halt."
India is Asia's third-largest economy.
Confirming the fears of many investors, the country's largest communist party described India's privatisation ministry as "unnecessary".
Congress says it will continue with privatisation, but only "selectively", and will not sell profit-making state companies.
"Clearly, the privatisation story is over for now," said director of Kotak Mahindra Asset Management, C Jayaram. "And the big India story, which was popular among foreign investors, will lose some its appeal."
The share slump knocked half a per cent off the value of the Indian rupee, which had gained gained five per cent against the dollar in 2003 as record levels of overseas money flowed into India.
Among those shares hardest hit were companies in which the NDA government had announced plans to sell a strategic stake.
Refiners Hindustan Petroleum Corp and Bharat Petroleum Corp Ltd both dived 13 per cent, while Shipping Corp of India, the country's biggest shipping line, lost 17 per cent to hit a nine-month low of Rs 86.70.
Shares in ONGC, the country's top oil producer, in which the Government sold a record $2.3 billion worth of shares in March, dropped 11 per cent to Rs 731.40.
Foreign funds have sold a net $365 million worth of Indian shares in seven straight trading sessions through Wednesday.
<b>Banks were also hit on expectations crucial sector reforms will be delayed or shelved</b>. State Bank of India, the biggest commercial bank, slumped 14 per cent to Rs 516.9 and Punjab National Bank plunged 18 per cent to Rs 263.50.