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Better times ahead?

Despite the benchmark Sensex tanking by close to 700 points in the last two trading sessions of the week, market participants are confident that the goodwill effect borne out of the UPA winning the trust vote will continue.
All eyes are, of course, on the revival of some of the government's stalled economic reforms. The most pertinent for the market being whether or not the government will raise the foreign investment limit for the insurance sector to 49%, open up the pension sector, increase voting rights of investors in private banks proportional to their shareholding and go ahead with the signing the nuke deal.

Stocks that are closely linked to sectors that will undergo policy changes are expected to benefit in the coming days.
"Being a long-pending issue, pension reforms will be on top of the government's agenda. Any step in this direction would immensely help banking firms offering insurance services. Similarly, increased voting rights will make banks more attractive for foreign investors. There are many companies that will benefit if the government signs the nuclear deal," says Angel Broking research head Hitesh Agrawal.

According to Agrawal, financial services institutions like HDFC, ICICI, Max India and Aditya Birla Nuvo will benefit from pension reforms. Midcap and smallcap banking stocks would continue to do well as investors expect some action of that front soon.

Most analysts expect the government to sign the nuke deal before the year-end. The capital goods sector — led by Rolta India, BHEL, L&T, ABB and Alstom Projects — is likely to benefit the most from this initiative. Rolta India is pepped to be one of the major beneficiaries of the nuke deal, thanks to its scope of business. The company has a substantial market share in engineering, safety design and project management services for nuclear power plants. Rolta expects to add few more projects after this deal. It has a tie-up with US-based Stone & Webster, which has been involved in the establishment of around 70% of the American nuclear reactors. Stone & Webster's parent has 20% in Westinghouse Electric, a nuclear reactor maker.

Alstom Projects (maker of nuclear reactors and rotors), Gammon India (does turnkey construction for nuclear projects) and Crompton Greaves (designs components for nuclear reactors) are the other companies expected to benefit from nuke deal.

PSU divestment has been one of the most severely debated issues over the past four years, with the Left parties squarely opposing it all the time. Though the Left parties softened their stand, with government assuring that proceeds of PSU disinvestment would go in for financial restructuring of debt-ridden companies, the government could not get clear consensus with regards to divestment.

"Now that the Left is not in the picture, there could be some movement with respect to PSU divestment. If all goes well, we'd see some PSU issues in another five to six months. The market will be happy to see some divestment happening in railways, power and infrastructure sectors," says Kotak Investment Banking COO S Ramesh.

According to an Edelweiss IPO review, about 75 closely-held government companies and banks have evinced interest in diluting their equity and going public. Much awaited-public issues of year include NTPC (which has plans to raise Rs 6,000 crore), HPCL (Rs 5,000 crore), Coal India (Rs 3,000 crore) and Gujarat State Petroleum Corporation (Rs 4,000 crore). The prospective merger of SBI and its listed subsidiaries, slated to happen this year, will also be a closely followed affair, analysts maintain.

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