BOMBAY, 7 April 2003 — It is that time of the fiscal when one takes a hard look at financial performances of various companies held in the portfolio and more importantly, look closely at the industries in which they exist. So this week, based on the last fiscal, we look at the sectors expected to do well in the current fiscal.
Banking: The banking sector is dominated by Scheduled Commercial Banks (SCBs). At end-March 2003, there were 296 commercial banks in India. This included 27 public sector banks (PSBs), 31 private, 42 foreign and 196 regional rural banks. Also, there were 67 scheduled cooperative banks consisting of 51 scheduled urban cooperative banks and 16 scheduled state cooperative banks. Retail banking is the new mantra in the banking sector. The home loans alone account for nearly two-third of the total retail portfolio of the bank. According to one estimate, the retail segment is expected to grow at 30-40 percent in the coming years.
Banking stocks have been rising due to a combination of factors. While the enactment of the Securitization Act has helped banks recover debts easily, huge bond trading profits are expected after a steep fall in yields. Bank stocks have remained firm following hopes of a cut in the bank rate when the credit policy is announced at the end of the month. Analysts say that the banking stocks to keep an eye on are State Bank of India, ICICI Bank, HDFC Bank, Corporation Bank, Federal Bank and Bank of Baroda.
Automobiles: Fiscal 2002-03 was a decent year for the auto industry. Bajaj ended the fiscal with an overall 6.2 percent growth. The bike segment grew 32.3 percent while the total two wheeler sales were up 4.3 percent. For the fiscal, TVS upped sales by 29 percent. Motorcycle sales grew 60 percent backed by spiffy sales of the 110 cc Victor. LML posted a 11.6 percent rise in sales. General Motors clocked a 8.19 percent increase in March, selling 1479 units (1367 units in March 02) comprising 1147 Corsas, 205 Astras, 75 Vectras and 52 units of the Chevrolet Forester. Hyundai Motor India (HMI) has sold an all-time high of 12,911 units during March to end fiscal ‘02-03 with a total sales of over 1.1 lakh units.
Pharmaceuticals: The Indian pharmaceutical industry is highly fragmented, but has grown rapidly due to the friendly patent regime and low cost manufacturing structure. Intense competition, high volumes and low prices characterize the Indian domestic market. The new WTO rules imply that India will have to switch to a product patent regime post 2005 from its current process patent regime. Over 20,000 registered pharmaceutical manufacturers exist in the country. The market share of MNCs has fallen from 75 percent in 1971 to around 35 percent in the Indian pharmaceuticals market, while the share of Indian companies has increased from 20 percent in 1971 to nearly 65 percent. As per WTO, from the year 2005, India will grant product patent recognition to all new chemical entities (NCEs). This leaves another 3 years of MNCs research output open to process piracy. As per analysts, Orchid Chemicals, Dr. Reddy’s Labs, Ranbaxy, Wockhardt, are some of the pharma companies which look promising.
Public Sector Undertakings (PSUs): PSUs have been in the limelight for some time now because of hopes for disinvestment. Hindustan Petroleum Corporation Ltd. (HPCL) and Bharat Petroleum Corporation Ltd. (BPCL) are the current hot favorites on the bourses. The government has invited initial bids for disinvesting its 34 percent stake in HPCL. Some foreign companies like Shell and Indian private sector giant Reliance Industries have submitted the bids for acquiring control over HPCL. The core group of secretaries (CGS) cleared the shareholders’ and share purchase agreements of the diversified Balmer Lawrie. CGS also decided that the company will be sold as a single entity.
The center intends to offload 61.8 percent of its equity stake in Balmer Lawrie.