Stock rally -- BSE, NSE chiefs differ

Stock rally -- BSE, NSE chiefs differ
REUTERS

NEW DELHI, JANUARY 10: The heads of India's two largest stock exchanges on Monday backed contrary views on which way Indian stocks would move. While the head of the Bombay Stock Exchange (BSE) said the current boom was sustainable on strong domestic and foreign investor interest, his counterpart at the rival National Stock Exchange (NSE) cautioned that the market could be overheated, particularly in the information technology section.

"It is rising too fast, too high," said R H Patil, NSE managing director. "It is not good for the market, it should rise in a steady fashion... a sharp rise can lead to a sharp fall. Information technology sector is extremely overheated," he warned. Patil also said the market had become volatile, responding to movements in overseas markets.

Indian share prices have recently tracked movements in overseas stock markets, particularly the US markets. "If the US market correction does not happen then our market may remain stable," Patil said.

BSE president Anand Rathi washowever optimistic about the future trend of share price movements. "Day to day there will be changes definitely. But long termite looks good. The undercurrrent is strong," he said.

He said the price movement was linked to economic fundamentals. "Ultimately, the price movement has to conform to economic development or economic growth. At the moment the understanding is very good that the market is going to grow," Rathi said.

Share prices could fall however if there was a tough Union Budget, he said. "Now supposing the Budget is hard... there is an increase in taxation, then the market may retreat. The budget could be tough, it depends... the key issue is the fiscal deficit."

Rathi said the heads of the financial institutions had suggested various methods to the Finance Minister to reduce the fiscal deficit. "There are various ways - interest rate reduction, accelerated privatisation. To my mind in next one year's time, they (the government) can easily raise Rs 400-500 billion through privatisation," hesaid.