While the implications of the oil price hike is being reviewed, brokers feel that the market will absorb and later discount it. Brokers say that foreign institutional investors would understand the policy and then make their move.
The market has almost bottomed out now, says Ketan Jhaveri, who is a chief dealer at Kotak Securities,
The market opened on a negative note as is the reaction to any price hike. The next few trading sessions are expected to witness a rally. We expect the rupee to stabilise steadily at around 36.775-levels. There is hardly any negative aspect left as the oil price hike announcement removes the shadow of uncertainty on the Indian economy, he added.
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Brokers also say that the move paves way for the success of the GDR issues of GAIL and Indian Oil Corporation (IOC).
Gul Tekchandani, chief investing officer, Sun F&C Asset Management company, told Business Standard that he expects the market to gain 300 points in the short term.
India is being looked upon by international investors as a stable country with a stable currency and interest and inflation rates, he said.
He also added that sectors like cement and automobiles are expected to be adversely affected by the announcement of these reforms.
Says Santonu Jana, research analyst, UTI Securities, There wont be much of a positive impact on the oil stocks in the coming days. Things could have been much better for the oil companies if the rate of interest of the bonds would have been higher and the bonds were tradable.
Sanjay Agarwal, chief executive officer, Lloyds Securities, said, The government has sent the much required positive signal to the international investing community by initiating these reforms.
It is a bold step by the government , and though it would result in inflationary pressures, it will be well under control. The hike would affect corporate profitability in the short term. The oil sector companies will benefit from bonds.
S Sriram, a strategist with Lloyds Securities, was of the view that given the limited options, the government had little room to maneuver. The decision was imperative but the government could have given a far better return on the bonds which they have issued, he said.
He feels that in the medium run, all the oil companies should be benefiting from the oil sector deregulation.
The oil companies should definitely benefit from the overall oil sector deregulation. However, how much of the enhanced margins will go to oil companies will depend on the exact nature of the tax structure that the government will decide and also on the extent of the deregulation, said Sriram.