Tuesday May 28, 09:00 AM
War and peace... |
|
By Equitymaster.com
It seems that the Pakistani leadership is not very clear about what it wants to do. In one breath the President of Pakistan talks about fighting till the last drop of blood and in the next he denies Pakistan's involvement in the infiltration along the line of control. The Indian leadership too is as confusing.
One day the prime minister talks about being prepared for a decisive battle, the next day he talks about clear skies with no war could. Then the leadership regrets about not taking tough steps post December 13 and yesterday, the home minister talked about another way to fight a war. This could imply the government is not looking towards going for an all out war but a contained confrontation like Kargil. To recap, markets did fall as the conflict began but continued to move up steadily as the war progressed. Thus, talks 'another way' could dilute apprehensions.
What might further bring relief to the markets could be the statement that Pakistan will not initiate a war. As it is last two trading sessions have experienced less nervousness. But the situation, as they say, continues to be very 'fluid'.
Other than the nervousness, the government delivering on the divestment front has mainly dominated sentiment. PSU stocks were once again in favour yesterday and gained sharply. A future trigger for some hectic activity could be mergers and acquisitions from the IT and banking sectors. A key competitive advantage for both these sectors is size. While size gives better reach to banks, for IT companies it is critical for wooing large customers. Big clients outsource large mission critical projects for which the business continuity of the vendor is a must. Smaller companies are the hardest hit when the business environment is tough.
Size was the key driver behind the recent merger of Polaris and ObriTech. The merger has made the combined entity the sixth largest software company in the country. The other reason acquiring companies is to extend the portfolio of offerings. Wipro (WIPRd.BO, news) is said to be in talks to buy out an IT consulting firm the US.
What adds more credibility to the mergers and acquisitions story is that banks and IT companies are sitting on a ton of cash and are more than determined to grow at a swift pace. A leading business daily, today, talks about the possibility of HDFC Bank (HDBK.BO, news) buying out Centurion bank.
But for the markets to look beyond the tension at the borders the situation would need to remain peaceful. The peace, however, is likely to be fragile. Therefore, the bourses could be expected to continue with a roller coaster ride and consequently, being range bound going forward, unless tension between India and Pakistan eases dramatically. Markets are likely to look forward to the address from the external affairs minister this evening, which could give some direction for rest of the week.
|
