Domestic triggers can only prop up the market next week
The market was on a nosedive last week shaving 4% over the week. The bourses were down everyday on concerns over the Greek debt crisis, which is likely to spill over the to other Euro nations, as well. Selling pressure was intense on the street dragging the Sensex below 17,000-point mark, the first time over the last two months.
Output growth in India eased a little in April. However, it still held near a 20-month high touched in February. India’s Purchase Managers Index (PMI) was seasonally adjusted after input prices remained near multi-year peaks, suggesting official wholesale price inflation could pick up from a 17-month-high of 9.9% in the latest data for March. The output price index rose for a second month in a row to 55.8 from 54.6. It has risen nearly four points since February.
China has raised the lenders' reserve requirement ratio by 50 basis points, effective 10th May, its third increase of that magnitude this year. That will take the bank reserve ratio for big lenders to 17%. The move is an attempt to reduce inflation and tame liquidity. Chinese consumer prices rose 2.4% in the year to March, surpassing the 2.25% rate on one-year certificates of deposit. Meanwhile, factory activity in South Korea picked up after a dip, surveys by HSBC/Markit showed on Monday.
The Indian government is likely to ease controls on the sugar sector as the outlook for the domestic crop improves, softening sugar prices. An impetus from the Commission for Agricultural Cost and Prices (CACP) has directed the government towards this. India's sugar output in 2010-11 is expected to increase to 23-24 million tonnes (MT) from an estimated 18.5 MT in the current year to September.
The International Monetary Fund (IMF) expressed its concern over the spreading of the Greece debt crisis to other euro nations. A massive Greek bailout package announced on Sunday failed to halt the increasing unrest about sovereign-debt problems along the euro zone’s boundary. However, the concern over the amount of aid and the possibility of a spread of the crisis raised jitters among investors, triggering an intense sell-off.
India’s wholesale price index is expected to fall 6%-7% within three months, the finance ministry's chief economic adviser said on Thursday. India’s annual wholesale inflation rose to 9.9% in March, compared with the 9.89% rise in February and 1.2% a year ago. The food price index rose 16.04% in the 12 months to 24th April, slower than an annual rise of 16.61% in the previous week, government data showed on Thursday. The fuel price index rose an annual 12.69%, same as the week ago.
Wheat stocks have increased more than seven times the target; however, the ban on wheat exports is still on. Wheat stocks in India as of 1st May were at 30.8 million tonnes (MT). The government has decided to give 3MT of subsidised grains in aid to states for the next six months.
Fed chairman said that a banking survey that reviewed nation’s largest 19 banks restored confidence in the banking system. US non farm pay roll grew at the fastest pace in the last four years as the private sector players ramped up hiring. The unemployment rate, however, rose to 9.9% as the size of the labour force increased. The European Central Bank is likely to hold interest rates at existing levels. Interest rates in the euro zone have now been on hold at 1% for a year and there is expectation that the rates will be left unchanged till next year. European laws prevent ECB to buy government bonds directly from the government; however, it can buy second-hand bonds from the banks.
India’s exports were down 4.7% in FY 2009-10 on the back of the global economic slowdown. However, the country is targeting an export growth of 15% in the current fiscal. Aided by government help and the low base effect, India’s exports have been in the positive zone in the last five months after a straight 13-month decline.
The real-estate sector in the metropolis seems to be heading towards the trend observed in 2008-2009 during the slowdown
Mumbai is expected to report lesser volume of real-estate transactions over the next six months, according to industry experts. The fourth quarter results of the last fiscal are also reflecting the lower sales trend in the realty segment. In fact, we may see a repeat of the scenario witnessed during 2008-2009, when the slowdown had severely impacted the real-estate industry.
If the current trend continues, Mumbai will soon see stagnation in property sales. Prices of various real-estate properties—both residential and commercial—have shot up by 30% in a few pockets of Mumbai over the last quarter.
“Post the recession, the increase is volume that you had seen will subdue, because in certain segments, prices have increased by 30%-40%. We are going to see lower volumes of transactions in the next six months compared to the last six months, if the prices do not come down,” said Pranay Vakil, chairman, Knight Frank (India) Pvt Ltd.
“For the first quarter of this fiscal, prices have gone up further by 15%-20%; we are estimating sales to go down further by 25%-30% ,” said Pankaj Kapoor, founder, Liases Foras.
“We need 20%-25% correction in prices to bring back the momentum in the market,” added Mr Kapoor.
“The prices of properties might not see a rise till September and we expect a slowdown in sales during the next quarter due to rains and holidays. But going forward, by October, we shall see a price rise by 10% as we approach the festival season. Usually during that period, the sales pick-up and demand comes back to the market,” said Mayur Shah, chief sales-business unit, Ackruti City Ltd.
The scenario in New Delhi also looks depressing for homebuyers. “Prices are going northwards. They are likely to increase by 10%-15% in the next six to nine months’ time," Parsvnath Developers chairman Pradeep Jain told the media in New Delhi.
Vijay Wadhwa, promoter of the Wadhwa Group, had told Moneylife earlier, “As the situation improved (after the slowdown), developers slowly increased the prices of properties by 10%-15% to cover their losses. But a few of them spiked up the prices over 25%, due to which they failed to report good sales figures.”
With the current scenario in the real-estate industry, will buyers be priced out of the market?
ARSS and Jubilant outshine in 2010 while Edserv Softsystems and Mahindra Holidays, listed in 2009, are still on a rollercoaster ride
The year 2010 has seen a spate of IPOs from companies trying to cash in on the booming stock markets and more than 20 companies have filed their red herring prospectuses with market regulator Securities and Exchange Board of India (SEBI). While some of them have burnt investors’ fingers, others have something to cheer about. As on 16 April 2010, 27 companies have entered the market this year including follow-on public offers (FPOs) from public sector utilities NTPC Ltd and Rural Electrification Corporation Ltd (REC). Among them, 16 stocks have left something on the table for investors when compared to their issue price while 11 stocks are in a freefall. From these, the top 10 performing stocks have gained an average of 56.42%.
Two IPOs have yielded more than 100% returns. These are ARSS Infrastructure Projects Limited and Jubilant Foodworks Ltd, which jumped 158% and 119% from their issue price. ARSS was issued at Rs450 while Jubilant was issued at Rs145.
Aqua Logistics Ltd (73%), Birla Shloka Edutech Ltd (41%), DQ Entertainment (International) Ltd (32.19%), Man Infraconstruction Ltd (27.78%) and JSW Energy Ltd (27.74%) are trading well above their offer price, as well.
In the year 2009, 18 IPOs hit the market. Out of them, eight stocks are trading below their issue price while the balance 10 are trading above their offer price.
Edserv Softsystems Ltd, which debuted on 2 March 2009 at Rs60, has shot up 249% at Rs209.10 as on 6 May 2010. Interestingly, the Edserv IPO was graded 1/5 by ratings agency CARE.
Mahindra Holidays and Resorts India Ltd, which was listed on 16 July 2009 at an issue price of Rs300, is up 58%. It closed at Rs473.05 in yesterday’s trading session. Cox & Kings (India) Ltd has also given a decent return of 42% from its offer price of Rs330; it closed at Rs468.15 yesterday. Similarly, Pipavav Shipyard Ltd has surged 41% at Rs81.95 from its offer price of Rs58. The BSE Sensex is up by 95% since March 2009.
Rishabhdev Technocable Ltd has disappointed investors the most as it dived 73% from its offer price of Rs33. The stock closed at Rs8.81 on the BSE today. Euro Multivision Ltd (-66%), Raj Oil Mills Ltd (-50.33%), Excel Infoways Ltd (-43%), Astec LifeSciences Ltd (-31%) and Indiabulls Power Ltd (-33%) have slipped from their offer prices of Rs75, Rs120, Rs85, Rs82, and Rs45, respectively.