Markets may remain bullish as easy money continues to slosh through global bourses
Markets ended the week with a wining streak. This is the eighth continued week markets closed higher against the previous week.
Although the market slid for the first three days of the week, it rebounded on the last trading day, paring early losses. The recovery came on the strong performance in Asian and European markets as stocks in these markets were on the uptrend on strong manufacturing data.
China’s official Manufacturing Purchasing Managers’ Index rose to 55.10 in March from 52 in February. Meanwhile, a separate China manufacturing PMI released by HSBC Holdings Plc and Markit Economics also rose to 57 in March 2010 from 55.8 in the previous month.
Earlier this week, Japan’s industrial production reported a fall of 0.9% in February with the unemployment rate dipping since March 2009. However, US data released on personal spending was encouraging as figures rose for the fifth consecutive month in February.
China’s central bank said that banking liquidity will be maintained to keep the growth momentum steady. Japan’s export orders were at a six-year high, which is a sign of recovery in the manufacturing market in China. The index for new export orders, a leading indicator of Japanese exports, rose to 55.7 from 55.2 in the previous month, hitting the highest level since May 2004. The US Federal Bank has said that interest rates will be kept unchanged as economic growth is on the recovery path and it is still to gain momentum. Closer home, the government came up with its borrowing plan earlier this week. It will sell Rs2.87 trillion ($64 billion) of bonds in the first half of 2010-11—63% of its record full-year target, less than market expectations.
Petrol prices have been raised by 1.1% in major cities that will migrate to Euro IV-complaint fuel to help oil firms to recover the investment made for plant up-gradations.
Diesel prices in leading cities, including Mumbai, would be hiked by Rs0.26 a litre, while in Delhi it will rise by more than Rs2 because of taxes. India’s exports rose an annual 34.8% in February to $16.09 billion, the fourth consecutive rise after 13 straight months of decline. Imports rose 66.4% from a year earlier to $25.06 billion. The trade minister expects exports to rise by 15%-20% in the next year. The National Stock Exchange announced a reduction in the market lot size of a number of stocks in the derivative segment. The market lot size has been revised from a lot of 124 stocks to a lot of 59 stocks. The food price index rose by 16.35% in the week ended 20th March, higher than the annual rise of 16.22% in the previous week. The fuel price index rose 12.75%, higher than an annual rise of 12.68% in the previous week.
Inflation is likely to weigh down industry, thereby slowing down production. High prices have compelled the government to keep subsidised food price unchanged till May. This subsidised food is distributed over 11.5 crore poor families across the nation.
Manufacturing growth in March slowed down from the 20-month record high in February. The HSBC Markit Purchasing Managers' Index, based on a survey of 500 companies, fell to 57.8 in March from 58.5 in February, which was the strongest since June 2008. A reading above 50 means activity is expanding. A fresh package of incentives worth Rs635 crore has been announced by the government for garment, textile, engineering, & electronics and agricultural products exporters. Prime minister Manmohan Singh has said that elementary education will be free which can be termed as a big-ticket programme from the government to cheer its rural and poor voters. Foreign institutional investors were net purchasers of Rs2,182 crore. Domestic institutional investors were net sellers at Rs 74 crore.
Markets will maintain a steady uptrend as long as central banks around the world continue with their loose monetary policies, which is channeling ‘hot’ money into various risky assets around the world.
A bunch of vested interests seem to be working together to fuel India’s new property bubble, especially in expensive real-estate markets like Mumbai
Real-estate prices in India, which are already reaching for the stratosphere, are being further fuelled by a set of vested interests such as established brokerage firms and leading media houses through reports which exaggerate demand and suggest that realty prices may go up even further. Meanwhile, angry investors are struggling to get the regulators to act quickly and decisively to dampen the price escalation.
Recently, ICICI Securities released an all-India survey (across eight cities) which was headlined—‘Affordability not a concern—healthy demand for homes at current prices: ICICI Securities survey’. A closer look suggests that things are not so rosy.
In fact, apart from vaulting prices, potential property buyers are outraged at how they are being cheated with regard to the actual usable area that is being sold to them. Moneylife has already reported on how the loading, which used to be anywhere between 20% (built-up) to 40% (super built-up) has now been pushed up to as high as 80% by several builders in Mumbai. With the government showing no signs of setting up a property regulator, builders and developers clearly feel confident that nobody will check their dubious selling tactics.
Another factor that has increased prices in Mumbai is the loading of taxes (in form of value-added tax (VAT) and service tax) on the already high price being forked out by consumers.
A research report circulated by ICICI Securities says that Ahmedabad has the highest inventory of 59%, Chennai has inventory of 10% while Mumbai has an inventory of 8% and National Capital Region (NCR) has only 1%. However, property experts are sceptical about these numbers. “It is a doctored report to show optimism. In fact, Chennai represents the least inventory and Mumbai & NCR the maximum. I am surprised to see such a false picture being painted by one of the credible brands,” said Pankaj Kapoor, founder, Liases Foras.
For many media companies, headlines that point to property prices rising even further, usually translates into increased advertising revenue. In some cases, they have equity deals with realty companies which include an agreement to project reports that favour these companies. A reader has written to point out that some of these headlines sound like “quotes from the builder”.
A senior executive of a leading information technology firm has even been writing to the governor of the Reserve Bank of India, pointing to how vested interests are pushing up property prices.
Average assets under management of the 37 fund houses fell 5% in March; JPMorgan Mutual Fund plummeted 24% while Peerless and Edelweiss jumped 150% and 30% respectively
According to data available with the Association of Mutual Funds in India (AMFI), out of the 37 fund houses, the average assets under management (AAUM) of 14 fund houses witnessed an average growth of 18% while 23 fund houses saw their AAUM slipping by an average of 9% compared to February 2010.
Among the 37 fund houses, JPMorgan Mutual Fund (Rs3,541.36 crore), AIG Global Investment Group Mutual Fund (Rs1,137.81 crore) and Shinsei Mutual Fund (Rs367.41 crore) recorded the highest fall of 24%, 21% and 20% respectively. Data for Baroda Pioneer Mutual Fund, Goldman Sachs Mutual Fund and AEGON Mutual Fund was not available.
Peerless Mutual Fund gained the maximum AAUM of 150% at Rs302.60 crore compared to last month—followed by Edelweiss Mutual Fund (Rs149.28 crore) and DSP BlackRock Mutual Fund (Rs21,490.78 crore) which gained 30% and 8% respectively.
Fidelity Mutual Fund, Franklin Templeton Mutual Fund, and Escorts Mutual Fund remained flat. While the AAUM in February 2010 grew by 3% at Rs7,81,711.50 crore, March has disappointed the mutual fund industry with a 5% fall.
The total AAUM has recorded a fall of 5% at Rs7,43,950 crore in the month of March 2010 compared to Rs7,81,711.50 last month while the BSE Sensex gained 7%, closing at 17,527.77 points in March compared to 16,429.55 in February 2010.
Among the top fund houses, HDFC lost 7% (Rs88,779 crore), UTI gained 1%
(Rs80,217 crore), SBI (Rs37,417 crore) gained 4% and Reliance Mutual Fund (Rs1,10,412.70 crore) lost 5% AAUM in March compared to last month.