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Funds want action, not talk, on privatisation drive

Fund managers in India's sulking stock market saw a ray of hope on Thursday after the prime minister threw his weight behind the privatisation programme that was stalled last month jeopardising the most successful reforms.

But they said Atal Bihari Vajpayee needs to do more to carry through the asset sales, which have been the biggest draw for the market this year.

"The reiteration sends out a positive signal but as ever we need to see results," Devan Kaloo, Singapore-based fund manager at Aberdeen Asset Management, told Reuters by phone.

Vajpayee put his foot down on Wednesday on opposition from within his fractious coalition on asset sales and said he stood by the government's divestment programme.

That pepped up market sentiment but the overhang of global stock slump and doubts over the government's ability to translate word into deeds prevented any significant buying.

India's blue-chip stock index opened higher but quickly sank and by afternoon was down 1.2 per cent at 2924.28. That fall also eroded the gains in shares of state-run companies.

Refiners Hindustan Petroleum Corp Ltd and Bharat Petroleum Corp Ltd, whose divestment delays last month had sparked a slide in shares of state firms, came off highs.

"We need to see less talk and more deliverance," added Kaloo, whose firm has $2.3 billion in Asia, excluding Japan and about $400 million in India.

Slow climb

Fund managers said confidence will return only gradually after the heavy beating the market took in the past month.

The blue-chip index lost over six per cent, slicing off nearly $6.5 billion from the market capitalisation after the privatisation programme was put on the backburner in early September.

The sectoral index for state firms tumbled 14 per cent, after gaining 75 per cent in the year to August.

Vajpayee's rearguard action may stem the fall, but he will have to push hard to steady the ship, fund managers said.

"As a first step it is encouraging, but it will not make fund managers change their ratings," said Samir Arora, portfolio manager for Alliance Capital Mutual Fund which owns about $500 million in Indian stocks.

"For that to happen, the government will have to take some definitive steps like the privatisation of the two refiners."

Analysts said the successful implementation of the privatisation programme will also project a positive image, which was sorely tested when Standard and Poor's cut domestic debt to junk grade last month, citing divestment delays.

"If the privatisation story goes forward this time around, it will convey to the world that opposition to the process was won over after debate in a democratic manner," said Arora.

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