India, since Fed announced its tapering plans, got its act together and has done quite well in pushing some key reforms in parliament. RBI on its part took some controversial, but crucial steps to stem the decline in rupee that followed the Fed announcement. Now, when Fed has put a halt on its tapering plans, we all can just keep our fingers crossed and hope that Indian govt. does not become complacent and let go off this lifeline. We hope that reform momentum continues and we get our house in order before the next shitstorm hit us.
Sensex gained 2.7%, Nifty gained 2.8% and CNX Midcap was up by 1.3% this week.
Monday – Sensex flat at 0.0%, Nifty down by 0.2%, Midcap down by 0.5%
Investors were disappointed on Monday as RBI released its WPI inflation figures. RBI while formulating its policies uses WPI data along with CPI as an anchor. According to data released on Friday, retail inflation dropped in August. However unlike retail inflation, WPI rose to six month high to 6.1% in August (July – 5.79%). Market is anticipating that upturn in WPI will make it difficult for newly appointed RBI governor to cut rates.
Tuesday - Sensex up by 0.3%, Nifty up by 0.2%, Midcap down by 0.3%
Investors remain cautious ahead of two key events this week. On Sept 18, Fed will take decision on whether to continue to taper and by how much. Street is expecting tapering of $5-$10 billion every month. Anything above or below that range can cause sharp movements in the indices. Raghuram Rajan has decided to unveil its maiden policy on Sept 20 after getting a handle on Fed announcements. These two events together may hold key to future movements of Indian indices.
Wednesday - Sensex up by 0.8%, Nifty up by 0.8%, Midcap up by 0.5%
Expectations from Fed meeting continue to weigh on the markets. Markets closed higher as FIIs continue to build positions in the Indian markets.
Thursday – Sensex up by 3.4%, Nifty up by 3.7%, Midcap up by 2.9%
Fed surprised the market with announcement of deferring its tapering plans and instead decided to continue with its stimulus amid weak economic growth in US. I already highlighted in June that how the timing of tapering is suspicious as US economy, and with it global economy, continues to struggle. Markets celebrated the decision as day of reckoning for many of emerging economies like India, has deferred to some unknown date in the future.
Friday – Sensex down by 1.9%, Nifty down by 1.7%, Midcap down by 1.3%
In his maiden policy, Raghuram Rajan stumped the investors with a repo rate hike. Repo rate is now 7.25%. Rajan made it clear that fighting the inflation and exchange rate management is his top priority, so there is a need of liquidity tightening. RBI, in a bid to lower the cost of capital of banks, reduced the MSF by 75 bps from 10.25% to 9.5% and slashed the minimum daily CRR requirement from 99% to 95%.
Sunday, September 22, 2013
Sunday, September 15, 2013
Weekly Market Commentary - Sept 9 - Sept 13, 2013
Receding fears of war with Syria led to cooling of oil prices that in turn led to strengthening of rupee against the global currencies. Rupee also gained strength as FIIs continued to buy Indian shares after newly appointed RBI governor Raghuram Rajan charted out plans to get the country out of its current mess. Sensex gained 2.4%, Nifty gained 3.0% and CNX Midcap was up by 3.4% this week.
Monday – Markets closed on occasion of Ganesh Chaturthi
Tuesday - Sensex up by 3.8%, Nifty up by 3.8%, Midcap up by 1.8%
Markets remained buoyant from last week sentiment boost they received from Raghuram Rajan appointment and his maiden speech as RBI governor. Global markets also took respite from the news that Russia has persuaded Syria to put its chemical weapons under international inspection, which worked to shelve the fears of US strike on Syria and led to global rally in stocks.
Telecoms were the major gainers today as TRAI reduced the base price by 37%, from Rs. 2,379cr to Rs. 1,496cr per MHz of pan India spectrum. TRAI also recommended that a flat spectrum usage (SUC) of 3% of gross revenue from 2-8% earlier. Telecom companies are expected to save around 60-80,000cr over a 20-year period.
Wednesday - Sensex up by 0.0%, Nifty up by 0.3%, Midcap up by 1.6%
Markets opened lower as some investors rushed to book profits after previous day’s rally, which was biggest gain in Sensex in four years. Market recouped its losses as day progressed as tension over Syria eased leading to cooling of oil price momentum. Also, consistent recovery in rupee is helping boost the Indian investor sentiment.
Thursday – Sensex down by 1.1%, Nifty down by 1.1%, Midcap down by 0.7%
Investors turned a little cautious and booked profits ahead of IIP and CPI inflation data release expected on Friday.
Friday – Sensex down by 0.2%, Nifty down by 0.0%, Midcap up by 0.7%
Stocks tumbled after PM’s economic panel raised its doubt over Govt. achieving its fiscal deficit target of 4.8% of GDP in current year. Investors also continued to cut positions ahead of US Fed meeting and RBI first meeting under Rajan next week. Market is keenly awaiting Fed’s decision on tapering and RBI’s response to it.
Bulls did get some respite in form of better-than-expected July 2013 IIP data (+2.6% yoy) and fall in retail inflation to 9.52% in August from 9.64% in July. August WPI data, an anchor used by RBI to decide on its policy decisions, will release on Monday.
Monday – Markets closed on occasion of Ganesh Chaturthi
Tuesday - Sensex up by 3.8%, Nifty up by 3.8%, Midcap up by 1.8%
Markets remained buoyant from last week sentiment boost they received from Raghuram Rajan appointment and his maiden speech as RBI governor. Global markets also took respite from the news that Russia has persuaded Syria to put its chemical weapons under international inspection, which worked to shelve the fears of US strike on Syria and led to global rally in stocks.
Telecoms were the major gainers today as TRAI reduced the base price by 37%, from Rs. 2,379cr to Rs. 1,496cr per MHz of pan India spectrum. TRAI also recommended that a flat spectrum usage (SUC) of 3% of gross revenue from 2-8% earlier. Telecom companies are expected to save around 60-80,000cr over a 20-year period.
Wednesday - Sensex up by 0.0%, Nifty up by 0.3%, Midcap up by 1.6%
Markets opened lower as some investors rushed to book profits after previous day’s rally, which was biggest gain in Sensex in four years. Market recouped its losses as day progressed as tension over Syria eased leading to cooling of oil price momentum. Also, consistent recovery in rupee is helping boost the Indian investor sentiment.
Thursday – Sensex down by 1.1%, Nifty down by 1.1%, Midcap down by 0.7%
Investors turned a little cautious and booked profits ahead of IIP and CPI inflation data release expected on Friday.
Friday – Sensex down by 0.2%, Nifty down by 0.0%, Midcap up by 0.7%
Stocks tumbled after PM’s economic panel raised its doubt over Govt. achieving its fiscal deficit target of 4.8% of GDP in current year. Investors also continued to cut positions ahead of US Fed meeting and RBI first meeting under Rajan next week. Market is keenly awaiting Fed’s decision on tapering and RBI’s response to it.
Bulls did get some respite in form of better-than-expected July 2013 IIP data (+2.6% yoy) and fall in retail inflation to 9.52% in August from 9.64% in July. August WPI data, an anchor used by RBI to decide on its policy decisions, will release on Monday.
Thursday, September 12, 2013
Realty Bites - 22 feet down under!
If you happen to be a resident of the region that has witnessed a ramp up in construction activities in past year or two, you must have wondered what is going to happen to prices when all this fresh supply will hit the market when existing inventory is lying unsold.
Do you also think that real estate prices are primed to fall?
Many will argue that Indian demographics is going to come to the rescue of the developers and investors who are hoping to make a quick gain on current real estate rage in India. We have a young population and we are an economy with tons of potential, they say. And, when these two things come together, we have a rosy scenario of higher incomes, higher purchasing power and hence rising demand for new housing. Some people also throw in NRIs and shady politician money into the mix to establish their case.
However, there are problems.
Number one problem is, although we do have lot of young graduates passing out of colleges every year, but we do not have jobs for them. For every one engineering job available, there are roughly 17 aspirants. See here, here and here.
That’s a huge gap! And that’s just engineering I am talking about. Millions other graduates are facing frustrating job markets these days. We will soon have unemployed or underemployed graduates who will be working below their potential and be less productive in what presumably considered best years of employment. That will lead to lesser confidence and lower ability to afford prices at current levels.
We can rule out politician’s illicit money with elections heading our way. None of us are stranger to the fact that billions of rupees being spent on elections every five years. I expect less of real estate buying will be coming from our netas, in fact we may see some unwinding.
Talking about NRIs, they might consider rupee stability before rushing to invest in Indian real estate. If you have been following recent swings in our currency, you would be aware that anyone investing would think twice and may choose to wait for better bargain (in case he/she believes expert opinion of rupee touching 70 in near term). Trust me, it is not easy decision to invest when your $100,000 can buy a 55 lakhs worth of house one day and 65 lakhs the another.
So, we come back to our original question. When Mumbai has unsold inventory of 48 months and Delhi NCR has 31 months, why the real estate prices not falling?
Why real estate prices are not falling when demand is diminishing and there is all gloom and doom in job markets?
Or the real estate prices are falling and our brokers and experts are lying to their teeth when they claim that housing prices never have and never will decline in this country. Well, same thing was told to gullible investors in Japan in 1980s, US in 2005, but we know what happened there.
But if do not trust our developers, brokers or experts for pricing data, who should we trust, you ask. The answer is of course no one. Everyone out there has an incentive to make you trade/invest/buy more so that they can unwind/sell their inventory or make some neat money on commissions. Only some impartial agency which collect and maintain some sort of real estate prices database can help us here. National Housing Board (NHB) is one such agency. NHB releases an index, called NHB Residex, of real estate price changes in tier I and tier II cities. Although it is a broad based index, meaning you cannot expect it to tell you whether Delhi NCR price decline means price decline in South Extension or Rohini or Gurgaon or Greater Noida. Nevertheless, it still can be used as guidance or a tool while making an investment decision.
For benefit of my readers, I am charting out latest NHB residence index data. You will very well see here that prices have declined in 22 out of 26 cities under survey in last quarter.
And no, this case is not an aberration. NHB has been recording fall in prices in major locations across the country for several quarters now. I’ll close the post with this chart that clearly goes out to bust the myth of “housing prices never fall”.
Do you also think that real estate prices are primed to fall?
Many will argue that Indian demographics is going to come to the rescue of the developers and investors who are hoping to make a quick gain on current real estate rage in India. We have a young population and we are an economy with tons of potential, they say. And, when these two things come together, we have a rosy scenario of higher incomes, higher purchasing power and hence rising demand for new housing. Some people also throw in NRIs and shady politician money into the mix to establish their case.
However, there are problems.
Number one problem is, although we do have lot of young graduates passing out of colleges every year, but we do not have jobs for them. For every one engineering job available, there are roughly 17 aspirants. See here, here and here.
That’s a huge gap! And that’s just engineering I am talking about. Millions other graduates are facing frustrating job markets these days. We will soon have unemployed or underemployed graduates who will be working below their potential and be less productive in what presumably considered best years of employment. That will lead to lesser confidence and lower ability to afford prices at current levels.
We can rule out politician’s illicit money with elections heading our way. None of us are stranger to the fact that billions of rupees being spent on elections every five years. I expect less of real estate buying will be coming from our netas, in fact we may see some unwinding.
Talking about NRIs, they might consider rupee stability before rushing to invest in Indian real estate. If you have been following recent swings in our currency, you would be aware that anyone investing would think twice and may choose to wait for better bargain (in case he/she believes expert opinion of rupee touching 70 in near term). Trust me, it is not easy decision to invest when your $100,000 can buy a 55 lakhs worth of house one day and 65 lakhs the another.
So, we come back to our original question. When Mumbai has unsold inventory of 48 months and Delhi NCR has 31 months, why the real estate prices not falling?
Why real estate prices are not falling when demand is diminishing and there is all gloom and doom in job markets?
Or the real estate prices are falling and our brokers and experts are lying to their teeth when they claim that housing prices never have and never will decline in this country. Well, same thing was told to gullible investors in Japan in 1980s, US in 2005, but we know what happened there.
But if do not trust our developers, brokers or experts for pricing data, who should we trust, you ask. The answer is of course no one. Everyone out there has an incentive to make you trade/invest/buy more so that they can unwind/sell their inventory or make some neat money on commissions. Only some impartial agency which collect and maintain some sort of real estate prices database can help us here. National Housing Board (NHB) is one such agency. NHB releases an index, called NHB Residex, of real estate price changes in tier I and tier II cities. Although it is a broad based index, meaning you cannot expect it to tell you whether Delhi NCR price decline means price decline in South Extension or Rohini or Gurgaon or Greater Noida. Nevertheless, it still can be used as guidance or a tool while making an investment decision.
For benefit of my readers, I am charting out latest NHB residence index data. You will very well see here that prices have declined in 22 out of 26 cities under survey in last quarter.
And no, this case is not an aberration. NHB has been recording fall in prices in major locations across the country for several quarters now. I’ll close the post with this chart that clearly goes out to bust the myth of “housing prices never fall”.
Tuesday, September 10, 2013
Word Cloud
I stumbled upon this nice website, http://www.wordle.net/ which can help you create a word cloud of your blog. You should all give it a try!
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