In a report titled ‘Quadrants of Fear’, Standard Chartered bank says the current despair over lack of decision-making has led to “irrational fears and stocks being pummeled multiple times for the same news”.
The report lists key policy measures that are pending and the stocks that are likely to see the most improvement in case of any positive action:
1. Insurance Bill: The report says that the proposal to raise the FDI cap to 49% from the existing 26% in insurance companies was “without any sound and objective analysis of the status of the insurance sector, following liberalization”.
Stocks that will be affected: HDFC, ICICI Bank, SBI. The HDFC stock has lost 6.5 per cent over the past year, while ICICI Bank has lost 21 per cent in the same period.
2. Spectrum policy: The empowered group of ministers on spectrum is yet to meet to decide the base price for spectrum auction. Most telecom companies are expressed concern about the high base price for bidding.
Stocks that will be affected: The report recommends buying Idea and Bharti as high spectrum prices could hasten consolidation. Bharti Airtel has lost 24 per cent over the past year, while Idea has lost 4.5 per cent over the same period.
3. Diesel, LPG price hike: While the government has been able to raise the price of petrol, there is inaction on the diesel front on account of coalition compulsions, the report said.
Stocks that will be affected: Oil marketing companies such as Bharat Petroleum and Hindustan Petroleum. HPCL has lost 17.61 per cent over the past year, while BPCL has gained 15 per cent.
4. FDI in retail: This has been a priority area for the government, but has been thwarted by coalition politics. The bill was proposed in the previous winter session of Parliament, but was withdrawn.
Stocks that will be affected: Pantaloon, Shoppers Stop. Pantaloon has lost 40 per cent over the past year, while Shoppers Stop has lost 26 per cent.
5. Coal block policy: According to a leaked draft report of the Comptroller and Auditor General, the allocation of coal blocks between 2004 and 2009 without holding auction had resulted in windfall gains worth Rs 10.67 trillion to private firms. Going forward, coal blocks will be auctioned.
Stocks that will be affected: Sterlite, Nalco. Sterlite has lost 39 per cent over the past year, while Nalco has lost 25.75 per cent.