US funds may dry up for Indian dotcoms: Sachs
NEW DELHI: Indian companies, particularly Internet start-ups and dotcoms
will now find it hard to raise funds from the battered US capital markets,
according to noted Harvard economist Jeffrey Sachs.
"The grinding halt to unprecedented bull run on US capital markets has
sounded a death knell to dreams of Indian infotech companies, especially
Internet firms raising funds from the American markets," Sachs said in an
interview.
The boom was exaggerated and stock prices of the Internet firms on the New
York Stock Exchange (NYSE) and Nasdaq were highly inflated, he said, adding
further correction in the stock index was expected.
The Nasdaq composite index, home to the technology stocks whose popularity
has evaporated, suffered its worst point drop ever on Friday - down 355.49,
or almost 10 per cent, to 3,321.29.
The Dow Jones industrial average plunged 617.78 points, or 5.7 per cent, to
10,305.77 -by far its biggest one-day point drop ever.
"However, this does not refute the new economy. We have a lot more to gain
from the efficiency and speed of Internet and convergence," he said.
Prices of the stocks besides the sentiments have to be related to future
earnings and profits, Sachs said.
Indian infotech firm, Infosys Technologies, listed on Nasdaq closed at $
172, down about 18 per cent from Thursday's close of $ 210, while Satyam
Infoway's share price nosedived to $ 29.5, down 23.37 per cent from the
Thursday's close of $ 38.
Kanwal Rekhi, a Silicon Valley-based venture capitalist said the stock price
boom was 99 per cent based on euphoria, but the prospects for the IT firms
as distinct from dot.coms remained strong.
"The price inflation mania has subsided and the US market crash was a
necessary process of self correction," he said adding, such correction would
repeat in India as well.
Dot.com firms must have clear streams of revenue and earn profits and
failure to do so would force investors to dump their stocks as it happened
in the case of 100 infotech IPO on the US bourses, Rekhi also president of
the Indus Entrepreneurs (TIE) said.
Sachs, a Harvard economist said, battering of stock prices in the US did not
reduce the attractiveness of Indian IT firms in the long-term as their
earning through service exports were real and manpower had world class
skills and experience.
The recent proposal by government to set up special economic zones for
hi-tech industry would help boost FDI flow into the IT sector, he
added.(PTI)
For reprint rights: Times Syndication Service
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