RTTNews - Monday, trading in both the Bombay and the National Stock Exchange was suspended for the day after the benchmark indices on the BSE and the NSE hit two upper circuit limits on optimism about poll results. The BSE Sensex was locked at 14,273, up 2,099 points or 17.24% and the S&P CNX Nifty rose 636 points or 17.33% to 4,308 before closing for the day.
Reports suggest that turnover in the cash and the F&O segments was less than Rs.1000 crore. The new government, which is expected to be sworn in by Friday, will come out with a full budget within 45 days of resuming office.
Investors were particularly impressed with the thumping majority given to the outgoing UPA government. As the victory sets the stage for the Congress led UPA to pursue its economic reforms, many expect fresh money from all kinds of investors to make its way into Indian stock market.
Investors have large hopes on disinvestments in public-sector undertakings. In the last 5 years, the government couldn't initiate its disinvestments plans because of opposition from the Left. The outgoing UPA government raised only about Rs.8, 500 crore compared to Rs.28, 000 crore raised under the preceding NDA regime. Now that the UPA has got a decisive mandate, investors expect faster decisions and less time- lag on disinvestments.
According to the Congress manifesto, the Indian National Congress doesn't believe in blind privatization and wants to retain a majority shareholding. Public sector enterprises in the manufacturing sector (like energy, transport and telecom) and in the financial sector (like banks and insurance companies) will remain in the public sector and will be given all support to grow and become competitive, the manifesto says.
But, given the need to clean up the fiscal deficit and raise resources for developmental activities, many believe that disinvestments in public sector banks may probably take-off this year. Improved stock market conditions and further optimism about an upturn in the economy may help state-owned companies get a good response. While firms such as NHPC, RITES and OIL India, which have already got regulatory approval to list shares, may get listed in a couple of months, listing and disinvestment in many other companies may follow with a considerable time lag.
There are 217 state-owned companies and 156 of them are making profits. The government holds a significant 85% stake in many of these companies, which include, Rashtriya Ispat Nigam, MMTC, NMDC, Hindustan Copper, Neyvelli Lignite, Power Finance Corporation and Indian Oil Corporation. A minimum 10% disinvestment in these companies could fetch significant amounts and can improve the corporate governance of these government -owned companies.
Besides disinvestment, the government may fast track the unfinished agenda of tax reforms like GST and reforms in the energy sector. The government is likely to accord high priority to the passage of bills in the pension, insurance and banking sectors. Infrastructure development and reforms in the education and the retail sector may also be on the priority list.
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