Maybe it is time for a blog on the stock market bubble. All Indian indexes are fluctuating like pendulums and noone seem to know the direction of the market. Just few months ago, every commentator on CNBC India was forecasting doom and gloom. Now everyone is cheering the market rise and predicting the moon. Its time for a bottom up analysis of the situation and try to gauge the market commentary from the trenches of our desks. We might not be on Dalal Street, however let them not insult our intelligence by propunding gibberish market analysis. The blog is at indiastockmarketbbubble.blogspot.com. Hope to see some of you folks there.
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15 comments:
Indian stock market is a traders market. Go with the flow and make a killing (from a guy who missed the bus in March 09, although I thought about entering the stock market deeply, but got sidetracked into RE possibilities). DAMN!
I see no reason for long term optimism. There will be NO earnings growth, on average, for sensex for next 2-3 years. Sensex fair value for the next 2-3 years is 8-10,000.
Lesson learned from March 2009: One extreme mood lasts 3-6 months. Currently the good mood started May 2009. I expect the mood to turn between September and December. Most likely adverse triggers are:
1. Global market downturn.
2. Oil price escalation to $90-100
3. Bank collapses from China
4. War (possible flash points:
a. Korea
b. Iran
c. Burmese nuclear adventure egged on by China
d. India/China border clash
e. Nepalese take over by China -
(c-e: to distract attention from Chinese bank collapses)
f. Civil war and unrest in Pakistan
The bull market of the new millenium is over. Next fantastic bull similar to 2003-7 will probably be after 2015.
If adverse possibilities do not materialise, inflation in India will harden rates and kill the stock market after 1-2 years.
Look around you-India is in pathetic condition. Our people are unemployable. We have a long hard road to prosperity. No work culture-no stock market bonanza!
Venkat ND
Hi,
I've writted a small post on coping with layoffs. A few close friends got laid off and this prompted me to write up this.
hope this is useful
http://lsjey.blogspot.com/
Regards,
lsjey
US Housing starts are positive and this will fuel a further revival in the stock market, which will no doubt take RE prices up..
From June to now, there has been a roughly 10-15% increase in prices across Mumbai, south Mumbai even more. Am not tracking high-volume locations like Thane, but barring such areas, rates have increased across the board.
Given that prices did not drop too much in the first place (compared to the way it rose), we have a situation now where the prices are back to where they were, or very close to the position, around 8 months ago, ie. Oct 2008. There is still some steam left for sure, and it looks like the strong/ok data from the stock markets means that there will be no negative outlook at least till the next quarter.
Doesnt take away from the fact that there is a bubble, as people in Mumbai are paying exorbitant rates to get sub-standard and overpriced houses. There is very little quality or standards employed by the builders which justifies the premium..
Jey,
Nice and practical, hope very few people will have to use it.
Thanks,
Bindas Bhai
Bindas Bhai
For the first time in this forum you have written a sensible sentence.
Otherwise most of the times you write as if you are a prescient arrogant b@$t@rd.
Call me naive, but I think there is no connection between the stock market and the RE market in India.
I feel bad for the people in India, who have no choice but to be fleeced by this cartel of builders, brokers, smugglers and politicians..substandard houses, with minor amenities, lack of electricity and water. Basically, people are slaves who work all their lives for some meagre savings which is looted from them by conning them. I hope people like BB feel proud about themselves for being the vampires they are.
@Above. I too feel the same.
Wonder why people still buy them. I know a builder closely. I have seen the quality of the apartment built by him. I wouldnt buy it even at 75% discount He he very good in marketing. (speaks very well). A lot of people have bought during the peak. Now the price is down by over 20%. (Still no takers even with 20% less). I feel sorry for them. That is a lot of difference. And these buyers are not business people or software engrs. They wasted their hard earned money. This builder has a built a posh independent villa for himself. You know what. The vitrified tiles used in house cost 400% higher than what he used in the apartments.
The real estate has been appreciating at a steady rate and this scenario in Mumbai is unlikely to change in the foreseeable future. The availability of land to construct more housing is limited whereas the number of moneyed people is growing at a rapid phase. This new class who really want to make mumbai as their home would not hesitate to spend the major portion of their earning towards owning a home.
Those who expect real estate bubble to bust and see a southward movement of prices are just imaging things as there is 'NO BUBBLE'. The price increase that mumbai has been seeing is a natural phenomenon moving proportionally with demand. Mumbai creates millionaires everyday and these people compete for the available space in the city that has given them riches.
I used to have a 6 figure annual income a few years back. Now that has reached 9 figures thanks to the mumbai consumer market. I would pay any amount to live in this city. There are thousands like me who would do the same. All the builders know this and they use it to their advantage.
There may be bubbles elsewhere in India, but definitely not Mumbai.
Anand:
You must be a builder. I wonder what you do that your income went from a few lakhs per year to tens of crores in a few years.
Tell us all that you pay proper taxes and do not steal from the Govt. of India and people of India. Are you sure you are not into anything illegal that you are hiding.
If you have that much money, why are you wasting your time here. Go get some nice massage and chill out.
Massive banks collapse is coming to the US in 3Q. Half of Florida banks will close.
Moreover, the GDP number today in US id all fudged up. The real number would be minus 10% in 4Q. This stock market rally is deceptive based on Govt. incentives. Consumers in US are still not spending and are 75% of the GDP. By 3Q, all the rally will go back by 20-30% levels.
I like that term - vampires!
So BB, Anand and all are vampires out to suck the blood of the greater fool. The intelligent fools are vultures! waiting for the vampires to die so that the vultures can feast!
I also agree that the DOW is headed for lala land in the short term. In the longer term all indications are that DOW should come down to half or below. In which case, China and India will also implode. Sensex should nose dive to 6000 levels soon! Can't wait to see the death of vampires, Go Vultures!!
I think there is lot of wishful thinking happening on this blog. To all the bulls and bears we need real analysis, debate and a persistent thread going.
It's true that, in the US there is a concern about bank collapses, but so far in this year (2009) 64 banks have already collapsed and this has been pretty linear trend, is it affecting the situation in India .. don't think so.
http://timesofindia.indiatimes.com/NEWS/Business/International-Business/In-less-than-7-months-64-US-banks-collapse/articleshow/4821575.cms
Whats really happening is that due to the stimulus package and quantitative easing (Money printing) in US and a few other countries, massive liquidity has been released in the system and this money needs to find a place to go. Global markets are so much coordinated these days money is coming to emerging markets or BRIC countries, Brazil and Russia are almost on the verge of Bankruptcy due to the commodities crash so China and India are favored destinations, and the money is arriving in all forms, be it FII in stock markets, GDRs, QIPs, FDI etc etc
Builders have got lots of QIPs, DLF Unitech, HDIL, infact Lodha too ... so there is massive cash infusion in India, foreign cash and not to forget our own stimulus, farm loan waiver,6th Pay commision etc etc ...
No wonder things are getting better, industrial growth rate, automobile numbers etc etc ...
Story so far has been good hence real estate prices haven't crashed, if only DLF or Unitech had gone bankrupt, prices would have certainly crashed.
Risks going forward,
-----Dollar rupee exchange rate : Dollar is really on a sticky wicket, china is jittery about it's treasury investments (about 270 bilion I think) and other countries (India and Russia) have also joined the chorus, but it's a catch 22 situation for them, if they start liquidating their investment, dollar will have a free fall ..) which obviously they don't want ... anyways this is going to be key thing to watch since most of outsourcing is hinged on dollar rupee arbitrage.
btw outsourcing is going to increase, as has been whenever situation in US is bad as was the case post the dot com bubble and Enron crash. TCS was hiring massively at that time and it paid of for them.
----- Fiscal deficit situation --- Due to the massive govt borrowing there is a huge risk of interest rates going up in India, RBI has a tough balancing act in that area, this is going to be another party pooper and can stifle the rebound which is not going to be good ..
---------- Commodity bubble ---------
Due to the massive money printing in the US, another commodity bubble might get build up which would again stifle the rebound in india.
--------- China --------
China has been doling out loans in billions to it's people to keep it's growth engine chugging ... credit quality is a serious risk there, if banks start collsping in china, India too would get affected ... but thats way ahead in future ...
------- Swine flu ---- Last but not the least, this is spreading fast all over the globe and could result into a crisis of gargantuan proportions.
I think the housing bubble is getting fueled again .. but the way things are there would definitely a crash at some point, depending on which of the risks start become a reality.
This is my own opinion based what I keep reading. Thoughts are welcome.
Ex-TCSer and a recent home buyer in Bhandup Mumbai
Why do people bring 'US' in the picture and relate India's prosperity to US market, in this blog. The upheavals in US have only a ripple effect on India's economy and has no bearing on the housing market. Mumbai has a unprecedented demand for medium/luxury apartments and the supply doesn't match it. The prices are increasing keeping with this trend. Unlike US for 90% of the apartments costing 1 crore or above, outright cash is paid, be it be black or white. Therefore bank loans , mortgage scenario etc have very little effect on housing market.
A fine quality educational blog! I like the way blogger presented information regarding the concerned subject.
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