We expect the market to trade in a range on Thursday

Yesterday we had suggested that the market will trade in a narrow range and remain listless for now. This is what happened. The market opened higher, thanks to overnight strength of the US market. The Dow Jones Industrial Average rose 43.91 points (up 0.41%) to 10,784.89. The Nasdaq rose 20.99 points (up 0.88%) to 2,395.40 and the S&P 500 gained 5.91 points (up 0.51%) to 1,165.81. 

Asian markets were also positive, except Shanghai. But Indian indices soon lost their entire gains and at one time slipped into the red. They recovered in the late afternoon after European markets opened in the black and thereafter closed mildly positive. The BSE Sensex added 36 points (up 0.21%) at 17,447 and the Nifty went up by 18 points (up 0.35%) at 5,223. Volatility was caused by the rollover in the derivatives section from the March 2010 to the April 2010 series ahead of the expiry of the near month March 2010 contracts on Thursday, 25th March.

The biggest gainers were HDFC Bank (2.53%), Reliance Industries (1.42%), Tata Power Company (1.39%), Tata Steel (1.15%), Oil & Natural Gas Corporation (0.85%). The biggest losers were Bharti Airtel (3.10%), Tata Motors (2.89%), DLF (1.94%), Grasim Industries (1.63%), ACC (1.56%), and Wipro (1.07%).

Mutual funds (MFs) sold shares worth a net Rs359.50 crore on Monday, 22nd March 2010, which was much higher than the Rs 101.80 crore on Friday, 19th  March 2010. The advance/decline ratio was negative. We expect the market to trade in a range on Thursday which is the day when derivatives expiry takes place. The market is closed tomorrow on account of Ram Navami.

Among macroeconomic news today, the finance ministry has said that the private sector will be allowed to issue infrastructure bonds.  The prime minister said that investment in infrastructure will be to the tune of $1 trillion in the five years to 2016-17. There has been lower investment than envisaged in the 11th Five Year plan in the power, road and port sectors because of the poor performance of these sectors. In the mid-term appraisal of the 11th Plan, the panel expressed concern over the slow growth of the farm sector over the past two years.

The Bombay High Court has ordered India’s oldest wine producer Indage Vinters to wind up. The country’s fledging wine industry calls it a ‘sad’ development, but says that it was bound to happen

On 19th March, India’s oldest wine producer, Indage Vinters, was ordered to shut shop by the Bombay High Court following a winding-up petition filed by its creditors. 

Considering that it was the remarkable guts and perseverance of Shyamrao Chougule, the founder, who brought international quality wine and champagne to India in the 1980s, the nascent wine industry in the country is saddened over this development.

However, given the efforts the company put in to fund its acquisitions in Australia and South Africa, it was a matter of sheer luck whether Mr Chougule’s gamble would pay off or lead to his company’s ruin.

The global financial crisis sealed the fate of the company—the international market did not perform to expectations and its plans to sell exotic Indian wines in overseas markets did not materialise. Domestic demand for international wine also fell far short of the hype created by the industry itself.

“This is a very sad chapter for the Indian wine industry as Indage Vinters were the pioneers in this sector,” said Violet D’souza, director and owner of Indus Wines. She added that the decision was expected as employees and vendors were facing problems with the company. Sula Wines’ vice president, Pradeep Panchpatel, echoed the same views.

This is not the first time the Chogules and Champagne India have been in such trouble. However, this time the situation looks too bad for them to bounce back.

An official from Nasik Valley Grape Promotion Association said that Indage’s travails will impact nearly 50% of the wine industry. Indage had tie-ups with around 15 small wineries like Flamingo, Century and Pratamesh to purchase wine in bulk and the decision of the High Court will probably spell the end of the road for these units, unless they can persuade other wine majors such as Sula, Grover or the UB Group to buy their stock.

But again, the entire industry is already saddled with large quantities of unsold wine from last year.

“Grape framers and other vendors will suffer from the fallout of the Indage collapse,” the official said. As of now, nobody expects Indage to be bought out in a hurry.

A former investor in the company attributed Indage’s downfall to the large gamble that it took in acquiring wineries in Australia and South Africa. “It was a big gamble and they couldn’t handle it. The writing on the wall was clear, they were overleveraged and we didn’t think their plans, which looked perfect on paper, would materialise,” he said. {break}

On the desperation of the group to grow rapidly, the investor said, “It was the race to remain number one. Those days, Vijay Mallya of the UB Group was planning a big presence in the wine industry and Ranjit Chougule—who was in charge of Indage—was worried about losing market leadership. What we did not expect is that it would unravel so fast—in just six months.”

Indage Vinters has said that it will challenge the order. “It is the company's contention that notwithstanding the order passed by the Honourable Court, it is not expedient to wind up the business at this stage and therefore the Board of Directors in its meeting held on 19 March 2010, has decided to challenge the said order by filing an appeal in the competent court,” Indage Vinters said in a statement to the Bombay Stock Exchange.

An email sent to the company remains unanswered, while managing director Ranjit Chogule and Vikrant Chogule refused to respond to messages.

It must be noted that Indage was pursuing a corporate debt restructuring (CDR) package for nearly Rs400 crore. This was led by ICICI Bank while the other lenders were IndusInd Bank, Allahabad Bank, UCO Bank, IDBI Bank and Bank of Rajasthan.

During the hearing on 19th March, Indage said that it had told the High Court that it plans to present a proposal with the support of some secured and unsecured CDR lenders in the next hearing. Indage said it was also ready and willing for a scheme of arrangement under Sections (391) to (394) of the Companies Act, to restructure its outstanding liabilities.

However, there might be some light at the end of the tunnel. On 23rd March, Indage Vintners Ltd has now informed BSE that the High Court has granted a stay of 15 days while considering the petition of winding up filed by the company’s creditors. The company’s statement says: “This is pursuant to the submission by the Company that the plans underway will find an amicable solution to meet with all obligations of the Company.”

Over eight months, property prices at Powai in central Mumbai have almost doubled

Powai is a tony residential location in central Mumbai. Property prices here are reaching for the stratosphere. Rates have almost doubled over the past eight months. Recently, a two bedroom-hall-kitchen (BHK) of 985 square feet (sq ft) in Lake Homes, a residential complex—developed by Ekta World and Supreme Universal— sold for between Rs 90 lakh-Rs 95 lakh. During the slowdown (around nine months back), an apartment of the same size would have sold for Rs68 lakh. In 2007, when the real-estate segment was at its peak, this apartment would have sold for Rs78 lakh, revealed a source.

Prices have been steadily going up in this apartment complex (Lake Homes). Around a month back, the property was priced between Rs80 lakh-Rs85 lakh; four deals took place at these prices. “Prices have been rising quite rapidly. I have seen four-five deals happening at Rs80 lakh-Rs85 lakh—recently a deal took place between Rs90 lakh–Rs95 lakh,” said a resident of that area, who preferred anonymity.

He also added, “The fourth phase of Lake Homes was launched at Rs5,400 per sq ft in May 2009, because the realty sector was going through a slowdown. But now I feel that the bubble is blowing up.” Currently, a 2 BHK in Lake Homes (of 985 sq ft) is priced at Rs 110,00,000, according to Magicbricks.com. A property agent in Powai said that the current price of a resale property in Lake Homes ranges between Rs11,000-Rs11,500 per sq ft. 

The Nahar Group, which was selling new buildings (of 925-975 sq ft) at its Nahar Amrit Shakti project in Powai at Rs52 lakh-Rs 58 lakh, is now quoting a price of around Rs 90 lakh. The group launched a residential project named Lilium & Lantana during the slowdown (around eight months back) at Rs5,400 per sq ft plus floor rise (a premium of Rs50 per sq ft), but now the price has jumped up to Rs9,000 per sq ft plus the floor rise premium. Hiranandani Gardens, a project by Hiranandani Developers, is retailing at a price ranging between Rs14,000-Rs18,000 per sq ft, said the realty agent. This area had reported sale of a 3 BHK flat (1,350 sq ft, fully furnished) at Rs1.15 crore around nine months back. Now it is difficult to get a 2 BHK flat at this price.

On top of this, buyers are also being forced to cough up 3% extra as service tax if the property is under construction. The Budget proposals on service tax on such properties have still not come into force, but developers are apparently passing on this proposed tax to customers. To add to the woes of prospective buyers, home loan interest rates have also gone up.