Deal a day, keeps the bears away
It is a deal a day for global financial markets now and India is no exception. If there is been one powerful propellant behind the recent performance of markets , it is corporate newsflow, which has picked up substantially. It seems the market likes nothing better than a good deal, if stock price reactions are any indication. Suzlon is a good case in point : the stock got hammered when the news of the REpower deal first broke but when it was finally sealed on Friday, it was up 20 per cent.
This constant deal-flow has taken up some of the slack of the post reporting season. An essentially triggerless season has been transformed. The market mood is understandably more upbeat on inward flowing deals. Whether it is Coke buying Tata Tea's stake in Glaceau, Viacom partnering TV18 to create a large entertainment franchise, or the mere prospect of IBM potentially picking up a large stake in Patni, stock prices have reacted very positively.
However, the twist this time is that even outward bound deals are being celebrated. The market seems to have shed the baggage of Hindalco and Tisco and saluted the large global acquisitions of Sun Pharma and Suzlon. And it is not just mergers and acquisitions which have the ticker buzzing. Indiainfoline cleaned out the CLSA top brass over the weekend. Investors loved the management's bold entry into the institutional broking business and the stock soared 30 per cent.It is obvious that the market is quite excitable at this point; the mere whiff of a deal sets stock prices on fire. Typical of a momentum market.
If the grapevine is to be believed, the pace of deal-flow is set to get even more frenetic. There is strong buzz of more deals in the pipeline : in sectors like telecom, aviation, IT, financials, pharmaceuticals and auto ancillaries. Many of these deals will be between companies, but a large number of significant stake changes may involve global institutions and private equity players, a trend we have seen recently in the United States. As bigger players come in with heavier money bags, they may want substantial, even controlling, chunks in interesting Indian businesses. The action has just about begun. Investment bankers may once again be topping the list of invitees in the Mumbai cocktail circuit.
(The writer is Executive Editor, CNBC-TV 18)