View From New Delhi: Monsoon holds the key to stock market revival

The Reliance group, India's biggest, has a new boss - Mukesh Ambani, who took over his late father's post of company chairman this week.

His younger brother, Anil, has now become vice chairman, Mukesh's old post.

Mukesh has scoffed all rumours about differences between the two brothers. "Anil is like a son to me," he said in an interview.

In any case, he says, the Reliance empire is big enough for all of us. The two companies, Reliance Industries and Reliance Petroleum, which between them account for a turnover of over Rs600 billion, are going to be merged by the end of the year.

The group will now focus on three areas, infocom services, petroleum retailing, and oil exploration. Infocom comes first, with an investment of Rs250 billion over the next five years.

About 2,000 petrol pumps are being set up for retail marketing of petroleum products as well as other group services. As regards oil exploration, an office has been opened in Houston, Texas, and the company is looking for business partners abroad.

The company has also opened an office in China which will be the hub of its plastics business. It is 50 per cent cheaper to produce plastics in China than in India. The company will export basic plastic chemicals from India and process them in China before exporting all over the world.

Reliance is also interested in power and is looking for suitable investments. It will soon acquire management control of BSES, a Mumbai-based electricity supply company, which is rapidly expanding. BSES is also involved in managing electricity distribution in Delhi.

However, Reliance is still very much a domestic company, which is unusual for a company with such a big turnover. The next step, says Mukesh, will be to turn multinational, maybe with petroleum as a base. How exactly this is going to be done is not quite clear yet.

Meanwhile things are hotting up in the Bajaj group, where Shishir Bajaj, brother of Rahul Bajaj, has said he wants to opt out of the group and has asked for his share of the capital.

This could be anything up to Rs5 billion depending on the share price of Bajaj Auto, which is actually managed by Rahul Bajaj.

Shishir can collect the money if he sells his holding on the stock market, but the family is not keen on this and wants Shishir to sell his shares to the company, not the public. The brothers are wondering how to do this without undercutting the share price.

Right now, the markets are more concerned about rains than the changeover at Reliance or the family feud in Bajaj. It is August but there are still no signs of rain in the north. The stock market has plunged below the sensitive figure of 3,000 points, a new low for the year.

Reliance itself is down from Rs350 a few months ago to Rs240, or by almost 30 per cent.

Hindustan Lever is also down and touched Rs160 on Friday before springing back to Rs170. Nine months ago, it was being quoted at Rs250. Lever derives half its turnover from the rural market.

The finance minister has announced a few tax sops including removal of service tax on insurance payments, but this has had no effect on the market. The sensex dropped by 12 points that day, but the minister has other tricks in his bag and hopes to revive the market before year-end.

It is the rain gods, not finance ministry, that holds the key to the markets but nothing seems to work. In Delhi, a litre of water costs nearly as much as a bottle of Coke. That is globalisation for you!