Tuesday, May 30, 2006

FII Outflow is Trickling to a Stop

Some interesting points of observation. The Nifty has been doing rangebound activity, and the bias is down. The US dollar has surged contrary to expectations as compared to the rupee. It touched Rs 46 to a dollar, and even breached this barrier.

First the bad news. A falling rupee clearly indicates that the demand for dollars is high. The usual suspects are exporters, but even they have never been able to take the dollar to such highs. Clearly money is being taken out by the FIIs who have been selling Indian equity and have so far removed over Rs 7,700 crore.

The good news is that sales of Indian equity by FIIs halved yesterday, with only Rs 116 crore sold. This nonetheless brings sales to a May figure of Rs 8124 crore, that almost kisses $2 billion.

Yesterday was a holiday for US markets, so US cues are absent. It is likely we could see another flat day.





Consider how the crisis has unfolded over the past eighteen months. The proximate cause is to be found in the housing bubble or more exactly in the excesses of the subprime mortgage market. The longer a double-digit rise in house prices lasted, the more lax the lending practices became. In the end, people could borrow 100 percent of inflated house prices with no money down. Insiders referred to subprime loans as ninja loans—no income, no job, no questions asked. - George Soros in latest book

everything’s going up, there’s a feelgood factor and people tell each other how much their houses are going up at dinner parties,” says Professor Mark Stephens of York University’s Centre for Housing Policy. “Then the music stops, as it always does.”

year, Japan was a more attractive market to put money in. If you look at the US, we can now get an internal rate of return of 25% there, so why would anyone want to come to India?” - a senior executive at an international financial services group, who did not wish to be named.

people told us house prices never go down on a national level, and that there had never been a default of an investment-grade-rated mortgage bond, "Mortgage experts were too caught up." - John Paulson, trader, who bet against subprime market and made $15 billion.

most puzzling are the real-estate projects of Parsvnath. Just have a look at the Pride Asia project near Chandigarh. They are asking almost US $300K-$350 K dollars for 2 bed room apartments. They have Villas in this project that costs more than US $1.5 million dollars. It is true that some people in India have that kind of money in India. However most of their wealth is black money and that can not be used to buy these properties. Obviously, these projects have been launched keeping NRIs in mind. - Sanjeev, comment from another site

Desai, aka Bani, the star of Balalji Telefilms's soap, Kasam Se, has been house hunting for over a year. She had almost closed a 2-BHK deal last year for Rs 1.5 crore in a Oberoi Constructions' building located at Andheri, Mumbai, but when she went back to confirm it, she was asked to cough up Rs 2.61 crore. Since then, she is still house hunting. - Mumbai Mirror


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