Wednesday, May 31, 2006

Where did the Rs 772 crore go?

The markets did bungee jumping today, down over 6% this morning with rumors that a 10% circuit would be visible during the day.

FIIs were reportedly selling Indian equity in the secondary markets and the general view given the dollar’s massive rise against the rupee is that FIIs are sending money packing back to the US, just 2-3 years after they discovered India to be a long-term bull market.

Then comes the Finance Minister, P. Chidambaram, on television soothing nerves, making positive noises, egging on retail investors do direct their funds to mutual funds.
All this against the cacophony of Communist leader Sitaram Yechury demanding the reintroduction of long-term, capital gains, Commerce minister Kamal Nath asking cement companies to reduce cements prices (subsequently keeping quiet and completely disappearing off the horizon). Now, we have Ram Vilas Paswan saying drug companies need to be controlled.

These ministerial speakouts happily precede FIIs rotating their portfolios, like a tango dance amid a circus of statements. Surely, the ministers are collecting funds for the elections 2 years from now.

Nonetheless, I am now going to unveil a secret that will amuse you if not amaze you. In the last couple of days, we have seen some really gut-wrenching market turns, and mainly falls, with screams of FIIs leaving the shores of this land. Even data from the last few days showed–albeit smaller–in FII sales.

My belief is that FIIs have been net buyers in the last two days, except that this money did not come in to the Indian stock markets–NSE or BSE.

More tomorrow….

Posted by Eclectic Investor at 11:05 PM  

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KM

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IN PASSING

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


“When 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.”

“Last 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.

"Most 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.

The 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

Prachi 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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