For many quarters on the trot, chaps in equity sales have begun their presentations to domestic and overseas institutions with a common refrain that the Indian growth story is intact. | |
| For the third time in as many months, the industrial production data came in lower than expected and in single digits. Phew! the boys will now have to alter their pitch and their slides. |
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| While it may be wrong to read too much into January's capital goods debacle, the fact is that the growth in industrial production has been in single digits for the past three months and is falling. What happens for three months in a row can't be ignored, it represents a trend. |
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| By Monday, the advance tax figures will be known. The markets' approach to these figures is likely to be cautionary. Revelations in the ICICI Bank and L&T cases have made the market sceptical. It may go through the results with a large magnifying glass. |
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| Another issue relates to exotic options and other deals entered by forex departments on the advice of banks. This column was the first to raise this issue on December 22, 2007 ("Of hedges and exotic options"). As this issue has since been extensively covered, I'll not revisit it, but it will be a matter of intense debate in the analyst meets this result season. |
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As the market is not in any rewarding mood, it's possible to speculate that some companies may be holding back some profits for future quarters. Some companies may prefer to take one-time hits for expenditure that can be apportioned to more than one year. The results, thus, may not surprise the markets on the positive side.
| SENSEX LEVEL | ALL BSE | BSE 500 | BSE 200 | | 12600 | 55.6 | 45.7 | 38.7 | | 8800 | 25.6 | 15.4 | 10.9 | | 6249 | 17.2 | 8.2 | 7.1 | | 4227 | 10.1 | 4.7 | 5.7 |
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| On Thursday, the Sensex broke the January low of 15,332, making some channels talk of stocks quoting at less than 12,000 or 10,000 levels. For a comprehensive view of what percentage stocks quote at what level of index see table. |
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| As I write this, S&P has suggested that banks may be finished with the bulk of write-downs linked to bad home loans in the US. The global financial services sector may end up writing down the fair value of such exposures by $285 billion, mainly from residential mortgage-backed securities and collateralised debt obligations. |
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| The rating agency had earlier estimated the amount to be $265 billion. While the agency understands the US economy better than us armchair economists halfway across the globe, the comment may have come a tad too soon. |
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| To draw the kind of line S&P has drawn, the first assumption it has to make is that home prices in the US will not deteriorate. |
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| Anyone with any idea of the property markets will understand that once a trend changes, it takes many years for it to start reversing. Lessons from the Japanese property markets must not be forgotten too soon. |
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| Despite the Fed slashing rates, mortgage rates have not fallen as much. In fact, the rates of a 30 year mortgage have risen by 0.50 per cent in the last one month. |
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| While the Fed is flooding the system with liquidity and cutting rates, the banks are not lending. Banks, who don't want to lose more money, have rightly tightened credit norms. |
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| Thus, there are fewer buyers for homes, reflected in prices. Buyers will return only if these fall to a level where EMIs reduce and come within the reach of the aspiring owner, whom bankers are currently keeping at bay. |
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