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Raghuvir Srinivasan

MISFORTUNE never comes singly. Ask market players and policy-makers. If sentiment was hit last week by Infosys' guidance, this week had worse in store.

Wipro followed Infosys with a downbeat performance that appeared to confirm the market's doubts on the technology sector. Wipro's stock was quickly marked down by 8 per cent on Thursday, the day its results were declared.

And chances are that when the market reopens on Monday after the long weekend there could be further value erosion in not just Wipro but other technology stocks as well.

Heading for another drought?

Wipro's numbers and the market's reaction were overshadowed by other more worrying events. The most important of these was the India Meteorological Department's forecast that there was a 21 per cent chance of a sub-optimal monsoon this year. Now, it may be early days yet, and this is also the first year that the Met Department has come out with an early forecast.

Normally, the forecast is done on May 25 when the monsoon knocks on the country's doorsteps. The Met Department has made some changes in its forecasting model but for which the predicted levels of precipitation would have qualified as a normal monsoon.

Yet, discounting for all these technicalities, there is cause for worry simply because the prediction follows a year when the monsoon failed in the most critical regions of the country. The drought caused by the failure is projected to have caused a 12 per cent drop in agricultural output in 2002-03 dragging down the GDP in the process. A second successive year of sub-optimal monsoon can cause havoc to the economy. The effect of poor agricultural growth is not confined to that sector alone but has widespread impact on the industrial sector as well.

A fall in the purchasing power in the rural areas can affect industries ranging from pesticides and petrochemicals to tractors and consumer durables. In fact, last year's drought has already impacted growth in sectors such as tractors and fast moving consumer goods. There cannot but be adverse fallout on the overall economy, and by extension the stock market from a second successive failed monsoon.

Truant truckers

The second worrying event of the week was the trucker's strike which has so far defied solution. Companies in industries ranging from automobiles and consumer electronics to cement and steel are saying that an extended strike could lead to a slowdown in their output or worse, even complete stoppage. Maruti Udyog, for instance, has warned that it may have to shut down its plant if the strike is not called off soon.

Others, such as Voltas, Samsung, Toyota, Tata Engineering, Dabur and Hindustan Lever, are saying that if the strike prolongs it could leave a scar on their financial performance.

It is not just a question of movement of raw materials for production but also the finished goods to the market. The risk is higher for those operating in perishable commodities. Rough estimates put the national loss at Rs 2,000 crore a day due to the strike.

SARS scare

If these were not enough, the SARS epidemic in the East Asian/South East Asian countries is having its impact on India. Tourism and airlines are the first casualties even as some experts say the impact of SARS could be a fresh destabilising factor for host economies. This could have a minor impact on India too.

Silver lining

However, it is not as if there is nothing to look forward to. We are now entering the corporate results reporting season, and a good performance is expected from major companies in industries such as automobiles, ancillaries, cement, oil refining and petrochemicals.

These industries have had a good year and their numbers could just be the required vitamin for a starved stock market.

Hopefully, and it is a big hope, the privatisation process will add its own steam to the overall sentiment apart from the market itself.

The Hindustan Petroleum sell-off is now in its home stretch with price bids likely to be called soon, and the Government's offer to sell its shares in Maruti Udyog may also come through in the first half. These could be the only events to look forward to in an otherwise depressing environment.

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