Month: September 2006

It is very unfortunate that the architect of Indian liberalization process Dr. Manmohan Singh holds the highest authority in the Government when the real estate sharks are all determined to grab land with an “whatever it takes” attitude.

The SEZ policy which appears to be flawed, has attracted criticism from within the partners and ministers within the government.

Here is a list of opinions from experts on the SEZs in India.

Dr Manoj Pant, of JNU said that “the best policy is not to have any sez at all”.

Highest banking authority of India, the RBI is concerned about possible Real Estate Bubble in India. RBI raised RED flag on SEZs in its current state and just two days ago the Governor of RBI, Y V Reddy looked worried and also said that, “Like any other land, SEZ is Real Estate” and didn’t hesitate to sign a resolution directing all banks operating in India treat loans to SEZ projects as “Commercial Real Estate” loans with immediate effect and not as Infrastructure project loans.

Now from within the government, Finance Minister, P Chidambram has expressed his concerns of loss of revenues because of tax paying industries relocating to SEZs which can operate as tax free zones. Both, the Finance and Commerce ministry have argued in public and also in Group of Ministers meeting defending their own cause. Chidambram had backers from the left parties, but Leftists have more genuine reasons to protest – SEZ land acquisition is displacing Agriculturists and peasants without any migration plan for their daily livelihood.

The saga begin with Mukesh Ambani controlled, Reliance Industries Limited controversial SEZ in Haryana. Younger brother Anil Ambani is also facing stiff resistance from former PM of India, V P Singh(Left) for Reliance Energy Limited proposed SEZ in Dadri which was cleared by Mulayam Singh Yadav government. It’s not just Reliance, but more evil real estate sharks are lobbying for Hotel SEZ ? What for ? DLF and Parsvanath Developers today received approvals for Real Estate SEZs. Jeez!!! This is getting crazy now.

Investigative journalist, Sucheta Dalal (Left) who exposed the great Indian Securities Scam(Harshad Mehta Scam) has said, “The SEZ (Special Economic Zones) policy, which provides little clarity on the impact of generous tax holidays and myriad concessions on the economy, may also come to a grinding halt, but nobody is complaining because every corporate group is rushing off to grab chunks of valuable real estate to set up SEZs, exactly like they chased power projects in the past.“

Day today review of SEZs in India is being done by this blogger, if you are interested to follow.

I am not really very happy to write this post, but every article and report that I read today is criticizing the SEZ policy in its current state. Investors kindly be careful about companies with Land Bank Saga before you commit your hard earned money in the Indian Share Bazaar.

SEZs which were taking shelter under infrastructure projects have now been classified as “Commercial Real Estate” projects with immediate effect due to the fact that most of them are Land Bank Scams and not really promoting the industrial and manufacturing activity as essential for the nations development. Commercial Real Estate is classified under high-risk lending by global financial institutions. Implies direct hit on the bottomline of SEZ companies.

Here is an exclusive coverage on the implications of SEZ being classified as commoner’s Real Estate projects and also other SEZ developments in India. Recall IMF chief had slammed the Indian Government for its SEZ policy which was not encouraging industrial activity in remote areas leading to uneven development patterns in the nation.

Banking stocks with huge exposure to commercial real estate are likely to be affected. ICICI Bank and Punjab National bank are the most vulenarable. So the next time when you want to BUY stocks because of the grand SEZ scheme, it may really turn out to be a nightmare. Just be cautious with stocks of Land Bank Saga!!!

I have been watching this channel for quite soemtime and find that, their analysts are really ill informed and biased. Consider the reviews of their infamous analyst, S P Tulsian. His view on Tech Mahindra during listing were it would list around Rs450 and would not go below Rs400. His levels of 400-450 never saw the light of the day. I would have forgiven him had he kept quiet. But today, when Tech Mahindra is now quoting around Rs590(25% higher than his Rs450) he says it is a good bet amongst those recently listed. Why does he keep changing his levels for the stock so drastically within such a short span of time when the company has not made any major announcement or results ?

Consider another analyst, Manish Bhatt of Prabhudas Lilladher,
Bhatt: Tech Mahindra should list at Rs 540. One can sell its shares on listing.One can buy GMR from the markets at current levels.
BUY GMR ? Good Grief, Mr. Bhatt!!!

Why such short sighted analysts get to be in the limelight to influence retail investors who are known to have the herd mentality ? Believe in the fundamentals of company and management (like Infy) before you make investment decision in the Chor Bazaar of Dalal Street 😉

Templeton’s emerging market guru, Dr. Mark Mobius today told the media that they are likely to introduce a new fund offering in November 2006 – Templeton SmallCap or MidCap Fund in India. Currently Mobius is focusing on smallcap and midcap stocks which are consumer oriented in India for the funds he manages.

Mobius further added that,” We have an underweight position on India relative to Russia, Brazil and China. Brazil is the largest, followed by China, Russia and India. We are looking for the day when valuations come down and we can buy in and get a big exposure in India“.

Of all the large PSU banks in India, IDBI is the laggard and has one of the highest NPAs with very non-friendly staff and non-consumer oriented banking products. In the 90s IDBI & ICICI were at par because both of them were industrial lending institutions. But in the late 90s, ICICI changed its policies and started writing off NPAs from cash profits every year and has attainted a healthy stature today. However, IDBI slacked and is still one of the worse banks in the country.

The RBI’s decision to handover United Western bank to another bank which is struggling to keep pace with is a bad move. However, IDBI is paying twice the book-value and 31% premium to the stock price of United Western Bank shares taking into consideration Sept-12th closing price of UWB.

IDBI issued its shares at Rs80 some 8 years ago and just on one or two ocassions the stock price has crossed oevr Rs80 when all the other investments have multiplied 8-10 times on Dalal Street. Considering this background and the huge NPAs and inability to perform, I recommend an exit for current stock holders of United Western Bank and maintain a SELL and underperforming rating on the stock.

Morgan Stanley might remind you of the infamous analyst, Andy Xie who came on CNBC TV 18 and announced that the party on Dallal Street is over – India was headed towards BEAR MARKET for the next 18-24 Months. And we are now seeign the sensex at 11,900 levels again.

Last month JP Morgan downgraded India and I told you folks to “just ignore it“. Morgan Stanley has taken a “U” turn and is now raising India’s GDP forecast from 6.8% to 7.6%. It is very likely that India will outperform Morgan Stanley’s expectations.

Last month we saw FII inflows of around $1 Billion(Rs4,5oo crores) Cheers!!! Individual FII investors will have different views and they keep reshfulling their portfolio.

Case Study for Market Behavior:
For example consider the Satyam stock which is regarded as a favorite amongst institutional investors. Satyam around Rs800 trades at a discount of 20 for its 2007 earnings while Infosys and Wipro trade at 30 for their 2007 earnings. When institutional investors are buying the stock, it moved up ir-respective of the direction of sensex and nifty. When the buying stopped, it lost its momentum and went into correction phase.

Why some are buying and some are selling ?
Satyam doesn’t maintain consistency in its earnings which is the hot favorite parameter to measure the stock amongst Fund Managers here. Observe last 8-12 quarters and it is evident.
Some fund managers argue that Satyam will touch $1 Billion in revenues this year and that is a very important mile stone to bag larger orders. They further think that company will not only be consistent for next 4-8 quarters but it will grow and hence they are buying. Some argue that it is hard for satyam to touch the Billion dollar mark but they are just holding to test its performance for next quarter.

Bottomline:
In this way individual stock will get re-rated or downgraded and FII money will continue to flow into Indian equities. If you can hold stock for the next 3 to 5 years, then BUY any fundamentally sound company you will make money. Else take my advice and go for SIP investment in mutual funds.

Morgan Stanley GDP Forecast for India,
Indian Investor ,
India Mutual Fund ,
Indian GDP