Thursday, May 25, 2006

Panic?—FIIs Pulled Out Rs 5,439 crore

Today's FNO expiry took the markets up. Distressing as it might seem, late-night data release showed that FIIs pulled out an additional Rs 1,935 crore on May 24, taking the net sales for May to Rs 5,439 crore.

Merrill-Lynch released a report today saying that it was normal for FIIs to withdraw about $1 billion each from emerging markets. China, Korea and Indonesia have shown commensurate slides, indicating this. It also correlates with the fact that demand for dollars has gone up–FIIs are sending money back home. The dollar today was about Rs 45.70 per unit.

Yesterday's post had said that FIIs have been known to pull out about $800-$900 million in previous years in one month, usually May or October. If this is to hold good this time, then over the next 3-4 trading sessions we would expect them to buy back heavily. Remember that this is mere conjecture.

Nonetheless, if it happens, it will set us a benchmark for future corrections, and also force us to be cautious in October.

Among other things, the Dow and Nasdaq have started moving up, having been flat yesterday. US GDP data shows that the economy has slowed down enough to contain inflation, and Fed chairman, Bernanke may pause interest rate hike.





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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