Friday, January 22, 2010
Sensex tanks 423 on FII selling
Sensex tanks 423 on FII selling
Times of India, January 21, 2010, Page 25
Chinese jitters, MUMBAI
Chinese jitters, fresh weakness in markets around the globe and investors’ disappointment with government's divestment plan pulled the sensex down to its lowest close in over a month.
After opening flat, the index slid through the day and ended at 17,051, down 423 points. It was the biggest single-session loss for the sensex this year and third-biggest in the last six months as foreign funds continued selling.
Going forward, market players expect foreign cues and results from domestic heavyweights like RIL and SBI to dictate market's direction. On Thursday, following the 122-point loss in Dow Jones in US the previous night, the sensex opened flat and as selling picked up through the session, touched an intra-day low at 17,025 and closed just a tad higher.
‘‘Markets were looking weak and were vulnerable for the last few sessions. Today when the market broke the key technical support level at about 5,190 on the Nifty (the index closed at 5,094), it appeared as if there was no tomorrow,'' said Arun Kejriwal, director, KRIS, an investment advisory firm.
Selling was across-the-board with all the 30 sensex stocks closing in the red. On the sectoral front, capital goods, power and realty stocks led the slide and all the BSE sectoral indices ended in the red. Among the sensex stocks, L&T was the top loser. L&T results, which were in line with expectation, with top line lower but margins higher, was not liked by the markets, and hence the selling, which led to a 6.9% loss in the stock to Rs 1,524.
The Chinese government's decision on Wednesday to curb lending to cool down a overheated economy also affected market sentiments, especially among the foreign funds. BSE data showed that FIIs have been net sellers during the last few days and on Thursday they had a net selling figure of Rs 854 crore. The day's losses also made investors poorer by Rs 1.6 lakh crore with BSE's market capitalisation now at Rs 61.8 lakh crore.
With a key technical support level broken, the market could slide further, chartists said. “Going forward, markets will look to foreign markets and results from heavyweight companies for further cues,'' said Kejriwal. Fund managers feel there could be some more slide and most are disappointed with the way government is going ahead with divestment. A fall-out of Thursday's slide was that some of the QIPs which have been lined up, did not generate expected response, giving merchant bankers some tough time.
Times of India, January 21, 2010, Page 25
Chinese jitters, MUMBAI
Chinese jitters, fresh weakness in markets around the globe and investors’ disappointment with government's divestment plan pulled the sensex down to its lowest close in over a month.
After opening flat, the index slid through the day and ended at 17,051, down 423 points. It was the biggest single-session loss for the sensex this year and third-biggest in the last six months as foreign funds continued selling.
Going forward, market players expect foreign cues and results from domestic heavyweights like RIL and SBI to dictate market's direction. On Thursday, following the 122-point loss in Dow Jones in US the previous night, the sensex opened flat and as selling picked up through the session, touched an intra-day low at 17,025 and closed just a tad higher.
‘‘Markets were looking weak and were vulnerable for the last few sessions. Today when the market broke the key technical support level at about 5,190 on the Nifty (the index closed at 5,094), it appeared as if there was no tomorrow,'' said Arun Kejriwal, director, KRIS, an investment advisory firm.
Selling was across-the-board with all the 30 sensex stocks closing in the red. On the sectoral front, capital goods, power and realty stocks led the slide and all the BSE sectoral indices ended in the red. Among the sensex stocks, L&T was the top loser. L&T results, which were in line with expectation, with top line lower but margins higher, was not liked by the markets, and hence the selling, which led to a 6.9% loss in the stock to Rs 1,524.
The Chinese government's decision on Wednesday to curb lending to cool down a overheated economy also affected market sentiments, especially among the foreign funds. BSE data showed that FIIs have been net sellers during the last few days and on Thursday they had a net selling figure of Rs 854 crore. The day's losses also made investors poorer by Rs 1.6 lakh crore with BSE's market capitalisation now at Rs 61.8 lakh crore.
With a key technical support level broken, the market could slide further, chartists said. “Going forward, markets will look to foreign markets and results from heavyweight companies for further cues,'' said Kejriwal. Fund managers feel there could be some more slide and most are disappointed with the way government is going ahead with divestment. A fall-out of Thursday's slide was that some of the QIPs which have been lined up, did not generate expected response, giving merchant bankers some tough time.
ICICI Q3 net profit dips 13% to Rs 1101cr
ICICI Q3 net profit dips 13% to Rs 1101cr
Times of India, January 21, 2010, Page 25
MUMBAI: ICICI Bank, the country's largest private sector bank, reported a 13.4% drop in net profit for the quarter ended December 2009 to Rs 1,101 crore from Rs 1,272 crore it earned during the corresponding quarter in the previous year. The bank's total income too dropped about 25% to Rs 7,762 crore during Q3FY10 from Rs 10,350 crore a year earlier.
The drop in net profit as well as in total income were largely attributed to fall in treasury income for the bank as yields in the debt market rose. For most companies in the financial services business, the lower rate of interest in the economy led to lower interest income.
ICICI Bank's loan and deposit books contracted during 2009 but top officials said credit demand was expected to pick up as the economy revives. It also said quality of its loans were improving because of conservative lending policies and revival in economic activities had slowed the rise in loan defaults.
‘‘The home loan registrations are going up month-on-month and car sales are going up month-on-month,'' Chanda Kochhar, CEO & MD, ICICI Bank, said during a conference call on Thursday. ‘‘Both these activities are seeing huge increase. So obviously, even the loans against homes or cars will see a good increase,'' Kochhar said.
In Thursday's weak market, ICICI Bank shares on the Bombay Stock Exchange ended 2.7% lower at Rs 853.
Times of India, January 21, 2010, Page 25
MUMBAI: ICICI Bank, the country's largest private sector bank, reported a 13.4% drop in net profit for the quarter ended December 2009 to Rs 1,101 crore from Rs 1,272 crore it earned during the corresponding quarter in the previous year. The bank's total income too dropped about 25% to Rs 7,762 crore during Q3FY10 from Rs 10,350 crore a year earlier.
The drop in net profit as well as in total income were largely attributed to fall in treasury income for the bank as yields in the debt market rose. For most companies in the financial services business, the lower rate of interest in the economy led to lower interest income.
ICICI Bank's loan and deposit books contracted during 2009 but top officials said credit demand was expected to pick up as the economy revives. It also said quality of its loans were improving because of conservative lending policies and revival in economic activities had slowed the rise in loan defaults.
‘‘The home loan registrations are going up month-on-month and car sales are going up month-on-month,'' Chanda Kochhar, CEO & MD, ICICI Bank, said during a conference call on Thursday. ‘‘Both these activities are seeing huge increase. So obviously, even the loans against homes or cars will see a good increase,'' Kochhar said.
In Thursday's weak market, ICICI Bank shares on the Bombay Stock Exchange ended 2.7% lower at Rs 853.
Food inflation softens marginally to 16.81%
Food inflation softens marginally to 16.81%
Financial Express, January 21, 2010, Page 2
fe Bureau
New DelhiOn a day when the government announced measures to shield poor families from the rise in food prices, the country’s food inflation marginally fell to 16.81% during the week ended January 9.
Food inflation stood at 17.28% a week ago. Despite the decline in food inflation, the rate is still higher, compared with last year’s level of 11.59% during the same period.
Cereal prices rose 14.18%, with wheat rising 15% and rice 12.64%. As reported by FE earlier, although potato prices have softened during the last few weeks, current prices rose by close to 50% y-o-y, while pulses turned dearer by 47.90% owing to higher imports cost. Milk prices rose by 13.95% over last year and are expected to surge further on lower availability, indicated by agriculture minister Sharad Pawar on Wednesday.
Pawar’s comment that states need to take a decision on the demand for hiking milk prices triggered a sharp reaction from political parties protesting against the rising prices of food products. The Cabinet Committee on Prices also announced that an ‘ad-hoc’ allocation of 10 kg per family, per month, over and above the existing allocation of foodgrain, mainly wheat and rice, would be made during January-February, 2010 and is slated to cover all poor families.
According to official data, the rise in fruit prices was moderate at 3.73%. Onion prices rose by over 15%, while vegetable prices were up 7.95%. This is mainly because of drought-like conditions prevailing in most of the onion and vegetable-growing regions of the country. Meanwhile, Sharad Pawar has said Prime Minister Manmohan Singh’s meeting with various state chief ministers on price rise, scheduled for January 27, has now been postponed and is likely to be slated for February 6.
The meeting is intended to devise a combined strategy to deal with rising food prices. Economists have said rising food prices will force RBI to tighten money supply, but will not lead to a rise in lending rates, owing to excess liquidity in the system.
Financial Express, January 21, 2010, Page 2
fe Bureau
New DelhiOn a day when the government announced measures to shield poor families from the rise in food prices, the country’s food inflation marginally fell to 16.81% during the week ended January 9.
Food inflation stood at 17.28% a week ago. Despite the decline in food inflation, the rate is still higher, compared with last year’s level of 11.59% during the same period.
Cereal prices rose 14.18%, with wheat rising 15% and rice 12.64%. As reported by FE earlier, although potato prices have softened during the last few weeks, current prices rose by close to 50% y-o-y, while pulses turned dearer by 47.90% owing to higher imports cost. Milk prices rose by 13.95% over last year and are expected to surge further on lower availability, indicated by agriculture minister Sharad Pawar on Wednesday.
Pawar’s comment that states need to take a decision on the demand for hiking milk prices triggered a sharp reaction from political parties protesting against the rising prices of food products. The Cabinet Committee on Prices also announced that an ‘ad-hoc’ allocation of 10 kg per family, per month, over and above the existing allocation of foodgrain, mainly wheat and rice, would be made during January-February, 2010 and is slated to cover all poor families.
According to official data, the rise in fruit prices was moderate at 3.73%. Onion prices rose by over 15%, while vegetable prices were up 7.95%. This is mainly because of drought-like conditions prevailing in most of the onion and vegetable-growing regions of the country. Meanwhile, Sharad Pawar has said Prime Minister Manmohan Singh’s meeting with various state chief ministers on price rise, scheduled for January 27, has now been postponed and is likely to be slated for February 6.
The meeting is intended to devise a combined strategy to deal with rising food prices. Economists have said rising food prices will force RBI to tighten money supply, but will not lead to a rise in lending rates, owing to excess liquidity in the system.
Food inflation eases marginally to 16.81%
Food inflation eases marginally to 16.81%
Business Standard, January 21, 2010, Page 1
BS Reporter / Mumbai
Food inflation softened to 16.81 per cent for the week ended January 9, led by lower fruit and vegetable prices, although pulses and potatoes continued to cost dearer.
For the week ending January 2, food inflation (prices of non-processed food articles) stood at 17.28 per cent.
According to the government data, on year-over-year basis prices of vegetables rose by 7.95 per cent and that of fruits by only 3.73 per cent.
While milk prices soared by 13.95 per cent over last year and is expected to surge further on lower availability.
"We are facing insufficient availability of milk, specially in northern India. In October, we had taken a decision to raise the price. Today, there is a demand that we should hike the price," Agricultural Minister Sharad Pawar had said yesterday.
Potato remained expensive during the period rising as much as 49.31 per cent from last year, followed by prices of pulses which jumped by 47.90 per cent.
The inflation for primary articles, which include food and non-food items, stood at 13.93 per cent in the reporting week over the previous year.
On weekly basis, the price index for food articles fell marginally by 0.1 per cent on account of decline in prices of vegetables (2.6 per cent) and other food articles (2 per cent).
Business Standard, January 21, 2010, Page 1
BS Reporter / Mumbai
Food inflation softened to 16.81 per cent for the week ended January 9, led by lower fruit and vegetable prices, although pulses and potatoes continued to cost dearer.
For the week ending January 2, food inflation (prices of non-processed food articles) stood at 17.28 per cent.
According to the government data, on year-over-year basis prices of vegetables rose by 7.95 per cent and that of fruits by only 3.73 per cent.
While milk prices soared by 13.95 per cent over last year and is expected to surge further on lower availability.
"We are facing insufficient availability of milk, specially in northern India. In October, we had taken a decision to raise the price. Today, there is a demand that we should hike the price," Agricultural Minister Sharad Pawar had said yesterday.
Potato remained expensive during the period rising as much as 49.31 per cent from last year, followed by prices of pulses which jumped by 47.90 per cent.
The inflation for primary articles, which include food and non-food items, stood at 13.93 per cent in the reporting week over the previous year.
On weekly basis, the price index for food articles fell marginally by 0.1 per cent on account of decline in prices of vegetables (2.6 per cent) and other food articles (2 per cent).
Inflation to exceed 9% by March: Pronab Sen
Inflation to exceed 9% by March: Pronab Sen
Financial Express, January 21, 2010, Page 2
Press Trust of India, New Delhi
The government on Thursday said inflation could exceed 9% by March end with the impact of crop failure becoming visible by the close of the fiscal.
“Unless something dramatic happens on agri prices, it (inflation) would probably be over 9%,” said Pronab Sen, chief Statistician of India and secretary, ministry of statistics and programme Implementation. Wholesale price-based inflation, which dipped to sub-zero levels following the impact of the global crisis, has started firming up and rose to 7.3%in December, 2009.
When asked whether easy money policy was also fueling inflation, Sen said, “I don’t think that is really the case. There is large undisbursed balance with the banks. However, it could become a problem going forward.”
On the steps that RBI could take in its forthcoming monetary policy review on January 29 to tame inflation, Sen said, the central bank has to take many other factors while changing the key policy rates and ratios.
Overheating China melts Indian market
Overheating China melts Indian market
Business Standard, January 22, 2010, Page 1
BS Reporter / Mumbai
Domestic 3rd quarter news weigh on sentiment.
Indian stock market indices fell to their lowest close in a month over concerns that China will take more measures to temper growth after reporting its fastest quarterly growth in two years.
Subdued world equities weighed on the sentiment as all Asian markets other than Japan closed in the red. The lowering of revenue forecast by Larsen & Toubro (L&T) pushed equities down further, with the Bombay Stock Exchange Sensitive Index falling for the third straight session by 2.4 per cent on Thursday.
Analysts, however, saw some silver lining with European markets trading higher.
China’s economy expanded 10.7 per cent in 2009, exceeding even the government’s own initial expectations. Consumer inflation rose to 1.9 per cent in December from 0.6 per cent in the previous month.
“There is a concern of overheating China,” said Vikram Kotak, chief investment officer at Birla Sunlife Insurance. He said the fall in the regional markets also pulled down the broader market.
The BSE 30-share index Sensex was down 423 points to 17,051.14 and the S&P CNX Nifty on NSE declined 127.55 points (2.44 per cent) to 5,094.15.
“Tightening of the monetary policy in China is a matter of time and there is also concern of higher inflation,” said V K Sharma, head of private broking and wealth management at HDFC Securities.
THE BLOW
# China’s GDP surges 10.7% between Oct & Dec, compared with a year earlier
# Consumer inflation rises to 1.9% in Dec from 0.6% previous month
IMPLICATION
# Beijing expected to lift interest rates in next few months
RIPPLE EFFECTS
# Dollar rises to its highest in 4 months
# Asian markets other than Japan close in the red
# Sensex down 423 points to 17,051.14
Analysts said the country’s largest engineering and construction conglomerate, L&T, which lowered its full-year revenue guidance citing project delays, affected the market sentiments badly. L&T said its revenue would grow 10 per cent for the year to March, slower than 15 per cent projected earlier, but maintained its order growth target at 30 per cent.
“L&T was a big dampener on the index,” said a dealer with a domestic brokerage who declined to be named. L&T share fell almost 7 per cent to Rs 1,524.35. ICICI Bank, whose net profit fell by 13.4 per cent was the other dampener.
Traders said absence of the biggest domestic institutional investor Life Insurance Corporation of India (LIC) from the market also had its impact. They said, had LIC been there in the market, such fall would not have happened. Due to the local strike at its corporate office, trading activities were minimal.
Bharat Heavy Electricals declined 4.1 per cent to Rs 2,297 on broad market declines, even as it reported a 5.4 per cent rise in its December quarter net profit, in line with street view. Oil & Natural Gas Corporation fell for the fifth straight session and closed nearly 2 per cent lower at Rs 1,140, ahead of its quarterly earnings release. ONGC reported a 23 per cent rise in third quarter net profit, its second straight quarterly rise, helped by firmer oil prices, but lagged market estimates. Reliance Industries, which has the highest weight on the Sensex, dropped 2.2 per cent to Rs 1,053.80, ahead of its quarterly results tomorrow.
In the broader market, four shares declined for every one share that advanced in a volume of 510 million shares, lower than last week’s daily average of 651 million shares.
Business Standard, January 22, 2010, Page 1
BS Reporter / Mumbai
Domestic 3rd quarter news weigh on sentiment.
Indian stock market indices fell to their lowest close in a month over concerns that China will take more measures to temper growth after reporting its fastest quarterly growth in two years.
Subdued world equities weighed on the sentiment as all Asian markets other than Japan closed in the red. The lowering of revenue forecast by Larsen & Toubro (L&T) pushed equities down further, with the Bombay Stock Exchange Sensitive Index falling for the third straight session by 2.4 per cent on Thursday.
Analysts, however, saw some silver lining with European markets trading higher.
China’s economy expanded 10.7 per cent in 2009, exceeding even the government’s own initial expectations. Consumer inflation rose to 1.9 per cent in December from 0.6 per cent in the previous month.
“There is a concern of overheating China,” said Vikram Kotak, chief investment officer at Birla Sunlife Insurance. He said the fall in the regional markets also pulled down the broader market.
The BSE 30-share index Sensex was down 423 points to 17,051.14 and the S&P CNX Nifty on NSE declined 127.55 points (2.44 per cent) to 5,094.15.
“Tightening of the monetary policy in China is a matter of time and there is also concern of higher inflation,” said V K Sharma, head of private broking and wealth management at HDFC Securities.
THE BLOW
# China’s GDP surges 10.7% between Oct & Dec, compared with a year earlier
# Consumer inflation rises to 1.9% in Dec from 0.6% previous month
IMPLICATION
# Beijing expected to lift interest rates in next few months
RIPPLE EFFECTS
# Dollar rises to its highest in 4 months
# Asian markets other than Japan close in the red
# Sensex down 423 points to 17,051.14
Analysts said the country’s largest engineering and construction conglomerate, L&T, which lowered its full-year revenue guidance citing project delays, affected the market sentiments badly. L&T said its revenue would grow 10 per cent for the year to March, slower than 15 per cent projected earlier, but maintained its order growth target at 30 per cent.
“L&T was a big dampener on the index,” said a dealer with a domestic brokerage who declined to be named. L&T share fell almost 7 per cent to Rs 1,524.35. ICICI Bank, whose net profit fell by 13.4 per cent was the other dampener.
Traders said absence of the biggest domestic institutional investor Life Insurance Corporation of India (LIC) from the market also had its impact. They said, had LIC been there in the market, such fall would not have happened. Due to the local strike at its corporate office, trading activities were minimal.
Bharat Heavy Electricals declined 4.1 per cent to Rs 2,297 on broad market declines, even as it reported a 5.4 per cent rise in its December quarter net profit, in line with street view. Oil & Natural Gas Corporation fell for the fifth straight session and closed nearly 2 per cent lower at Rs 1,140, ahead of its quarterly earnings release. ONGC reported a 23 per cent rise in third quarter net profit, its second straight quarterly rise, helped by firmer oil prices, but lagged market estimates. Reliance Industries, which has the highest weight on the Sensex, dropped 2.2 per cent to Rs 1,053.80, ahead of its quarterly results tomorrow.
In the broader market, four shares declined for every one share that advanced in a volume of 510 million shares, lower than last week’s daily average of 651 million shares.
Home prices almost back to 2007-08 levels
Home prices almost back to 2007-08 levels
Business Standard, January 22, 2010, Page 2
Raghavendra Kamath / Mumbai
Developers say the rise reflects a rebound in demand and isn’t irrational
Apartment prices at Planet Godrej, a premium residential property developed by Godrej Properties in the tony Mahalaxmi area of Mumbai, had come down to as low as Rs 17,000 to Rs 18,000 a sq ft in the property market slowdown last year.
The flats now sell at Rs 27,000 to Rs 30,000 a sq ft — just short of the peak rate of Rs 32,000 a sq ft in 2007-08.
It’s not the commercial capital alone that has seen real estate prices on fire. Last week, the Jaypee group sold 600 plots on the Greater Noida Expressway, near Delhi, within three days at Rs 36,000 a sq yd (one sq yd equals nine sq ft). Brokers say the plots are now available for only Rs 39,000 a sq yard and will touch Rs 42,000 a sq yard within a few days.
On Pune’s posh Bhandarkar Road, apartment prices have risen 80 per cent in just five months. For example, flats at local developer Avaneesh Construction’s housing project are now available at Rs 9,000 a sq ft, compared to Rs 5,000 in August.
Welcome back to the era of crazy rises in home prices. After a year of sanity, when property developers were reducing rates even in premium areas, it’s a rewind to 2007-08, when prices had more than doubled in as many years on the back of strong buyer and investor demand, as the stock markets boomed.
Then, apartment prices had gone down by 30 per cent from their peak, as home sales had almost come to a standstill in the last few quarters of 2008-09, reflecting a worldwide economic slowing.
Pranay Vakil, chairman of Knight Frank India, a leading property consultant, says: “We have seen an up to 30 per cent rise in home prices in the last six months. A lot of pent-up demand came into the market around Diwali. That, coupled with strong NRI (non-resident Indian) interest, has led to the rebound in prices. Most NRIs have invested in Mumbai property this time, instead of Dubai.''
The NRIs were absent from the property market in 2008-09. Vakil says prices have mostly risen in prime areas, where new projects are being sold out within days and where supply is limited.
For instance, in the Prabhadevi area of Mumbai, if the delivery is three years away, prices have gone up to Rs 21,000 a sq ft. If the project completion is two-three months away, prices are Rs 25,000-Rs 27,000 a sq ft. But, if a house is ready to be moved into, it could go for Rs 30,000 a sq ft, Vakil adds.
The Maharashtra government has been quick to cash in on the rise in property prices and has increased stamp duty and registrations charges by 15 to 20 per cent in Mumbai, depending on the locality in the city. Last year, it did not revise these rates, as the property market was down.
Analysts clearly see the return of investors in the residential market as stock markets have started booming. In the slowdown of 2008-09, investors had vanished from markets such as the National Capital Region.
Religare Capital Markets’ Associate Vice-President P Suman Memani attributes the rebound in property rates to the stock market boom. “Till August 2009, the price rise was moderate. But, after September, when indices shot up, investor and speculative interest returned to the real estate market. Sale prices have gone up by 50 per cent in some cases. It hurts genuine buyers and is not good for the market,’’ Memani says.
Take Parsvnath Developers’ premium project, La Tropicana, in the Civil Lines area of Delhi. Brokers say prices have risen to Rs 12,000 a sq ft, from Rs 8,000 a sq ft in April 2009, a rise of 50 per cent. The developer has sold 415 apartments out of the 450 they have planned. The project is nearing completion.
In Mumbai, in the Oberoi Woods project in Goregaon East, prices have risen 50 per cent in the past nine months, from Rs 10,000 a sq ft in April to Rs 14,000-15,000 a sq ft now. “It is dangerous if prices go up from Rs 2,700 a sq ft to Rs 4,000 a sq ft even if the delivery is four years away,’’ Memani adds.
Realty research firm Liases Foras’ Managing Director, Pankaj Kapoor, is also not happy. “The government is helping the developers to increase prices. They allowed restructuring of loans,” he adds.
Some developers do not agree and say price increases are just a function of the market. “We will go along with interest rates. If the annual interest rate is 10 per cent, we will raise it by 10 per cent. Customers will run away if you increase it irrationally. You have to increase it only to the level where it does not affect your sales,” says Unitech MD Sanjay Chandra.
Adds Hiranandani Constructions’ Managing Director Niranjan Hiranandani: “I think such an increase is only in some isolated cases. If prices are reasonable, volumes will be good. If they are too high, volumes will come down.’’
So, where are the prices headed from now on? "The acid test for the property market will come in March, when the pent-up demand goes away and NRIs pull back. If stock markets continue to do well, demand will sustain. Otherwise, it will not,'' says Vakil of Knight Frank.
(With inputs from Pravda Godbole)
Business Standard, January 22, 2010, Page 2
Raghavendra Kamath / Mumbai
Developers say the rise reflects a rebound in demand and isn’t irrational
Apartment prices at Planet Godrej, a premium residential property developed by Godrej Properties in the tony Mahalaxmi area of Mumbai, had come down to as low as Rs 17,000 to Rs 18,000 a sq ft in the property market slowdown last year.
The flats now sell at Rs 27,000 to Rs 30,000 a sq ft — just short of the peak rate of Rs 32,000 a sq ft in 2007-08.
It’s not the commercial capital alone that has seen real estate prices on fire. Last week, the Jaypee group sold 600 plots on the Greater Noida Expressway, near Delhi, within three days at Rs 36,000 a sq yd (one sq yd equals nine sq ft). Brokers say the plots are now available for only Rs 39,000 a sq yard and will touch Rs 42,000 a sq yard within a few days.
On Pune’s posh Bhandarkar Road, apartment prices have risen 80 per cent in just five months. For example, flats at local developer Avaneesh Construction’s housing project are now available at Rs 9,000 a sq ft, compared to Rs 5,000 in August.
Welcome back to the era of crazy rises in home prices. After a year of sanity, when property developers were reducing rates even in premium areas, it’s a rewind to 2007-08, when prices had more than doubled in as many years on the back of strong buyer and investor demand, as the stock markets boomed.
Then, apartment prices had gone down by 30 per cent from their peak, as home sales had almost come to a standstill in the last few quarters of 2008-09, reflecting a worldwide economic slowing.
Pranay Vakil, chairman of Knight Frank India, a leading property consultant, says: “We have seen an up to 30 per cent rise in home prices in the last six months. A lot of pent-up demand came into the market around Diwali. That, coupled with strong NRI (non-resident Indian) interest, has led to the rebound in prices. Most NRIs have invested in Mumbai property this time, instead of Dubai.''
The NRIs were absent from the property market in 2008-09. Vakil says prices have mostly risen in prime areas, where new projects are being sold out within days and where supply is limited.
For instance, in the Prabhadevi area of Mumbai, if the delivery is three years away, prices have gone up to Rs 21,000 a sq ft. If the project completion is two-three months away, prices are Rs 25,000-Rs 27,000 a sq ft. But, if a house is ready to be moved into, it could go for Rs 30,000 a sq ft, Vakil adds.
The Maharashtra government has been quick to cash in on the rise in property prices and has increased stamp duty and registrations charges by 15 to 20 per cent in Mumbai, depending on the locality in the city. Last year, it did not revise these rates, as the property market was down.
Analysts clearly see the return of investors in the residential market as stock markets have started booming. In the slowdown of 2008-09, investors had vanished from markets such as the National Capital Region.
Religare Capital Markets’ Associate Vice-President P Suman Memani attributes the rebound in property rates to the stock market boom. “Till August 2009, the price rise was moderate. But, after September, when indices shot up, investor and speculative interest returned to the real estate market. Sale prices have gone up by 50 per cent in some cases. It hurts genuine buyers and is not good for the market,’’ Memani says.
Take Parsvnath Developers’ premium project, La Tropicana, in the Civil Lines area of Delhi. Brokers say prices have risen to Rs 12,000 a sq ft, from Rs 8,000 a sq ft in April 2009, a rise of 50 per cent. The developer has sold 415 apartments out of the 450 they have planned. The project is nearing completion.
In Mumbai, in the Oberoi Woods project in Goregaon East, prices have risen 50 per cent in the past nine months, from Rs 10,000 a sq ft in April to Rs 14,000-15,000 a sq ft now. “It is dangerous if prices go up from Rs 2,700 a sq ft to Rs 4,000 a sq ft even if the delivery is four years away,’’ Memani adds.
Realty research firm Liases Foras’ Managing Director, Pankaj Kapoor, is also not happy. “The government is helping the developers to increase prices. They allowed restructuring of loans,” he adds.
Some developers do not agree and say price increases are just a function of the market. “We will go along with interest rates. If the annual interest rate is 10 per cent, we will raise it by 10 per cent. Customers will run away if you increase it irrationally. You have to increase it only to the level where it does not affect your sales,” says Unitech MD Sanjay Chandra.
Adds Hiranandani Constructions’ Managing Director Niranjan Hiranandani: “I think such an increase is only in some isolated cases. If prices are reasonable, volumes will be good. If they are too high, volumes will come down.’’
So, where are the prices headed from now on? "The acid test for the property market will come in March, when the pent-up demand goes away and NRIs pull back. If stock markets continue to do well, demand will sustain. Otherwise, it will not,'' says Vakil of Knight Frank.
(With inputs from Pravda Godbole)
A small hike in CRR will not hurt
A small hike in CRR will not hurt
Hindu Business Line, January 22, 2010, Page 6
Will reduce liquidity, ease inflation concerns: Naina Lal Kidwai.
Our Bureau, New Delhi
Pointing to the high inflation and sufficient liquidity in the system, HSBC India Country Head, Ms Naina Lal Kidwai, said on Thursday that the Reserve Bank of India has room to increase the cash reserve ratio (CRR) by 25 basis points. CRR is the amount of money that banks have to keep with the RBI. The central bank is expected to make its monetary policy review announcement on January 29.
Ms Kidwai, however, cautioned against withdrawing the stimulus in a hurry as it was important to sustain the growth momentum. She also said according to HSBC research, the country would grow by over 7.5 per cent this fiscal and 8.5 per cent in the coming one.
“There is a lot of liquidity in banks, over Rs 80,000 crore. It may be needed in the longer term as projects and credit off-take go up. But there is room for some of it to be mopped up in the near term. A small CRR hike of 0.25 per cent would mean just about Rs 8,000 crores going out of the system. It doesn't hurt anybody or destroy the growth momentum,” Ms Kidwai told presspersons here on the sidelines of a Ficci-event on microfinance.
Noting that high inflation is a concern, she said a CRR hike would signal an important change, but may not upset the applecart.
Asked about the possibility of withdrawal of the stimulus announced by the Government and the RBI to counter the economic slowdown, she said, “The desire of our policy makers has to be to ensure that India stays on its growth trajectory. I don't think we should be in a hurry to withdraw the stimulus because it is carrying growth forward.”
Ms Kidwai said in due course of time, the stimulus will have to be rolled back bearing in mind the fiscal deficit.
On interest rates, she said, “I don't think interest rates are going to go up hugely in a hurry. But it might increase in the next six months.”
On the banks' credit growth, Ms Kidwai said it will definitely be lower than that of last year. “Last year companies had no other recourse to funds than the banks. But every corporate has turned to the capital markets in the last six months,” she said
“However, I believe corporates will begin to turn back to the banks. There is every indication that companies are looking at capacity addition,” she added.
Hindu Business Line, January 22, 2010, Page 6
Will reduce liquidity, ease inflation concerns: Naina Lal Kidwai.
Our Bureau, New Delhi
Pointing to the high inflation and sufficient liquidity in the system, HSBC India Country Head, Ms Naina Lal Kidwai, said on Thursday that the Reserve Bank of India has room to increase the cash reserve ratio (CRR) by 25 basis points. CRR is the amount of money that banks have to keep with the RBI. The central bank is expected to make its monetary policy review announcement on January 29.
Ms Kidwai, however, cautioned against withdrawing the stimulus in a hurry as it was important to sustain the growth momentum. She also said according to HSBC research, the country would grow by over 7.5 per cent this fiscal and 8.5 per cent in the coming one.
“There is a lot of liquidity in banks, over Rs 80,000 crore. It may be needed in the longer term as projects and credit off-take go up. But there is room for some of it to be mopped up in the near term. A small CRR hike of 0.25 per cent would mean just about Rs 8,000 crores going out of the system. It doesn't hurt anybody or destroy the growth momentum,” Ms Kidwai told presspersons here on the sidelines of a Ficci-event on microfinance.
Noting that high inflation is a concern, she said a CRR hike would signal an important change, but may not upset the applecart.
Asked about the possibility of withdrawal of the stimulus announced by the Government and the RBI to counter the economic slowdown, she said, “The desire of our policy makers has to be to ensure that India stays on its growth trajectory. I don't think we should be in a hurry to withdraw the stimulus because it is carrying growth forward.”
Ms Kidwai said in due course of time, the stimulus will have to be rolled back bearing in mind the fiscal deficit.
On interest rates, she said, “I don't think interest rates are going to go up hugely in a hurry. But it might increase in the next six months.”
On the banks' credit growth, Ms Kidwai said it will definitely be lower than that of last year. “Last year companies had no other recourse to funds than the banks. But every corporate has turned to the capital markets in the last six months,” she said
“However, I believe corporates will begin to turn back to the banks. There is every indication that companies are looking at capacity addition,” she added.
ICICI Bank sees 25% rise in home, auto loans disbursals
ICICI Bank sees 25% rise in home, auto loans disbursals
Hindu Business Line, January 22, 2010, Page 7
Our Bureau, Mumbai
In the third quarter ICICI Bank earned a profit of Rs 202 crore from the sale of 81 per cent stake in its Point-of-Sales terminals business to First Data Corporation. This boosted its other income.
The home and auto loan segments have seen a pick up with disbursements increasing by 25 per cent. The retail loan book now accounts for 45 per cent of the total asset portfolio, said Ms Chanda Kochhar, Managing Director and Chief Executive Officer, ICICI Bank.
Though the ratio of non-performing assets to total assets increased, the provisioning is lower, which is an indication of the improvement in asset quality, Ms Kochhar said. Provisions declined marginally to Rs 1,002 crore (Rs 1,008 crore).
The provisioning coverage ratio now stands at 62 per cent with technical write offs.
The bank has received licenses for 580 branches and will be opening them before the end of this fiscal. This will take its network to 2000 by March 2010, Ms Kochhar said.
New Board of Directors
The board of directors of ICICI Bank appointed Mr Homi R. Khusrokhan and Mr V. Sridar as non-Executive Directors, said a press release from the bank.
Mr Khusrokhan retired as the Managing Director of Tata Chemicals Ltd in 2008. He was earlier Managing Director of Tata Tea and Glaxo India Ltd. Mr V. Sridar retired as Chairman and Managing Director of UCO Bank in 2007. Prior to that he was Chairman of the National Housing Bank and Executive Director of UCO Bank.
Mr Khusrokhan and Mr Sridar would hold office up to the date of the next Annual General Meeting, when their appointment would be considered by the shareholders of ICICI Bank.
Mr P.M. Sinha, non-Executive Director of ICICI Bank, today retired from the board, the press release said.
Hindu Business Line, January 22, 2010, Page 7
Our Bureau, Mumbai
In the third quarter ICICI Bank earned a profit of Rs 202 crore from the sale of 81 per cent stake in its Point-of-Sales terminals business to First Data Corporation. This boosted its other income.
The home and auto loan segments have seen a pick up with disbursements increasing by 25 per cent. The retail loan book now accounts for 45 per cent of the total asset portfolio, said Ms Chanda Kochhar, Managing Director and Chief Executive Officer, ICICI Bank.
Though the ratio of non-performing assets to total assets increased, the provisioning is lower, which is an indication of the improvement in asset quality, Ms Kochhar said. Provisions declined marginally to Rs 1,002 crore (Rs 1,008 crore).
The provisioning coverage ratio now stands at 62 per cent with technical write offs.
The bank has received licenses for 580 branches and will be opening them before the end of this fiscal. This will take its network to 2000 by March 2010, Ms Kochhar said.
New Board of Directors
The board of directors of ICICI Bank appointed Mr Homi R. Khusrokhan and Mr V. Sridar as non-Executive Directors, said a press release from the bank.
Mr Khusrokhan retired as the Managing Director of Tata Chemicals Ltd in 2008. He was earlier Managing Director of Tata Tea and Glaxo India Ltd. Mr V. Sridar retired as Chairman and Managing Director of UCO Bank in 2007. Prior to that he was Chairman of the National Housing Bank and Executive Director of UCO Bank.
Mr Khusrokhan and Mr Sridar would hold office up to the date of the next Annual General Meeting, when their appointment would be considered by the shareholders of ICICI Bank.
Mr P.M. Sinha, non-Executive Director of ICICI Bank, today retired from the board, the press release said.
The reality on rates
The reality on rates
Hindu Business Line, January 22, 2010, Page 8
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By its own admission, the RBI's easy money policy has not worked as well as it should have. A reversal of the policy now would simply ratchet up an already high real interest rate regime.
--------------------------------------------------------------------------------
One issue that the Reserve Bank of India (RBI) should consider in its third quarter review due next week is the impact of administered rates on its key monetary policy changes. The Governor, Dr D. Subbarao, has repeatedly pointed to the way administered rates on small savings, among other factors, jammed its signals for cheaper lending by banks. The interest rate of 8 per cent for deposits under small savings schemes set the floor for banks as a result of which lending rates fell far less than the central bank's own aggressive reductions in the cost of funds called for.
That was last year when the RBI was aggressively pursuing a soft interest rate policy. Now it is set to weigh its options about tightening a bit. Given the headline inflation of around 7 per cent and the likely effects of bountiful liquidity on its upward movement, the natural tendency for Dr Subbarao would be to push the buttons for tighter money so as to skim off any excess demand. However, before doing so, the RBI should recall its critique on administered rates. Despite itself and by its own admission, its easy money policy has not worked as well as it should have in making domestic capital cheap. Under the circumstances, any reversal of the easy money policy now would simply ratchet up an already high real interest rate regime. As it is, the enthusiasm for bank credit is just picking up as the latest data show; sending signals out for dearer money could dampen that pick-up at a time when it is most needed to rev up investment growth. The RBI surely knows that its signals for higher interest rates work far better than those announcing a dip; administered rates after all set the floor not the ceiling. That is exactly why the RBI must view a rate or cash reserve ratio (CRR) hike this month with some reservation. Domestic rates have been historically high, a feature that had Indian firms scurrying for cheaper global capital during the period of high growth till 2008-09. The only way to change that pattern is for the RBI to curb external commercial borrowings or for its signals for softer rates to work effectively.
Dealing with administered rates and government borrowings, whose ever-increasing size also prevent bank rates from falling, is New Delhi's job; it may be easier to control the need for funds than it will be to reduce rates on small savings or abolish administered rates altogether. But as financial services acquire sophistication, that task too could be tackled without hurting the interests of the small saver.
Hindu Business Line, January 22, 2010, Page 8
--------------------------------------------------------------------------------
By its own admission, the RBI's easy money policy has not worked as well as it should have. A reversal of the policy now would simply ratchet up an already high real interest rate regime.
--------------------------------------------------------------------------------
One issue that the Reserve Bank of India (RBI) should consider in its third quarter review due next week is the impact of administered rates on its key monetary policy changes. The Governor, Dr D. Subbarao, has repeatedly pointed to the way administered rates on small savings, among other factors, jammed its signals for cheaper lending by banks. The interest rate of 8 per cent for deposits under small savings schemes set the floor for banks as a result of which lending rates fell far less than the central bank's own aggressive reductions in the cost of funds called for.
That was last year when the RBI was aggressively pursuing a soft interest rate policy. Now it is set to weigh its options about tightening a bit. Given the headline inflation of around 7 per cent and the likely effects of bountiful liquidity on its upward movement, the natural tendency for Dr Subbarao would be to push the buttons for tighter money so as to skim off any excess demand. However, before doing so, the RBI should recall its critique on administered rates. Despite itself and by its own admission, its easy money policy has not worked as well as it should have in making domestic capital cheap. Under the circumstances, any reversal of the easy money policy now would simply ratchet up an already high real interest rate regime. As it is, the enthusiasm for bank credit is just picking up as the latest data show; sending signals out for dearer money could dampen that pick-up at a time when it is most needed to rev up investment growth. The RBI surely knows that its signals for higher interest rates work far better than those announcing a dip; administered rates after all set the floor not the ceiling. That is exactly why the RBI must view a rate or cash reserve ratio (CRR) hike this month with some reservation. Domestic rates have been historically high, a feature that had Indian firms scurrying for cheaper global capital during the period of high growth till 2008-09. The only way to change that pattern is for the RBI to curb external commercial borrowings or for its signals for softer rates to work effectively.
Dealing with administered rates and government borrowings, whose ever-increasing size also prevent bank rates from falling, is New Delhi's job; it may be easier to control the need for funds than it will be to reduce rates on small savings or abolish administered rates altogether. But as financial services acquire sophistication, that task too could be tackled without hurting the interests of the small saver.
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