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Om Shanti Om: Old economy dances

business Updated: Jun 07, 2012 16:24 IST
Suman Layak

The old economy danced well in 2007, almost doing a tango with the Shah Rukh Khan starrer Om Shanti Om that celebrated the seventies and did good business. Oldies like Tata Steel and Larsen & Toubro that recently celebrated their centenary and 70th anniversary led the charge of the oldies.

The next year may be one of stock taking and consolidating gains. “It will be one of challenge,” says Bhavesh Shah of Asit C Mehta says. “The year 2007 was one of bagging orders and gaining on invisibles. In 2008 the companies will have to deliver on these promises or else they will get a beating like the auto sector in 2007.”

And research head of Anagram Stock Broking, VK Sharma almost echoes the view in saying that the sector will cool down a little in 2008. In fact, the year should belong to the oil and gas sector, Sharma says.

If we look at the sectoral indices we see that the BSE metal index outperformed the Sensex by 121 per cent and the capital goods index did better by 116 per cent. But both these sectors are likely to cool down in 2008 a little. “It will be difficult for companies like Larsen & Toubro and Bharat Heavy Electricals Ltd to repeat their performance this year,” he said.

One sector that did not do well in 2007 but did much better in 2006 is cement. Shah says: “The government is committed to infrastructure development and the eleventh five year plan has also been cleared. So infrastructure, cement and construction companies should have a good year.” New entrants in construction like Reliance Energy would also benefit.

In 2007 the BSE Small Cap index outsmarted the Sensex by 75 per cent. Sharma says: “This is the first year where the small investor who would be investing in the smaller companies also felt the impact of the rally – although this rally has been on for the last five years.”

Steel is one area, which is likely to see good results in 2008 as the steel demand in India keeps increasing and there is little threat from China as the demand in China too is increasing even faster.

The years 2007 proved that the old economy is now the new economy and old heroes can still deliver hits.