Realty, metal drag down Sensex 291 pts

Realty, metal drag down Sensex 291 pts
The Economic Times, July 1, 2009, Page 10

MUMBAI: Realty and metal shares led the slide in equity benchmarks on Tuesday, as traders pared their long positions in the run-up to the Union Budget on July 6. Institutional investors, too, chose to play safe, as the general perception is that shares are fairly valued at current levels, and offer limited upsides even if the Budget meets market expectations. The Sensex fell 291.90 points, or nearly 2%, to close at 14493.84. The Nifty fell 89.85 points, or 2.3%, to close at 4291.10. News from the global economy was mixed. According to the Chicago purchasers’ index, US business activity contracted less than expected in June, raising hopes that the economy could improve in the second half of the year. On the other hand, the UK economy shrank a higher than estimated 2.4% in the first quarter of 2009, also the biggest contraction since 1958. Back home, realty shares were the worst hit, as it becomes increasingly clear that only a select few will be able to raise capital, and that too at valuations dictated by buyers. DLF, HDIL and Indiabulls Real Estate were among prominent losers, falling in the 8-12% range. “Our approximate calculations show that $15-20 billion worth of equity issuances at current multiples would raise the book value and 2010 EPS by 4-5% if profitability ratios are maintained on the newly-raised capital too,” said a Credit Suisse note to clients. “Earnings enhancement is less likely for the ongoing year. Forward EPS momentum, rather than valuation expansion, will be the primary positive driver of the market in the quarters to come,” the note added.—Our Bureau