Housing sale down 4% in 8 cities in 2015; 6.9 lakh units unsold : Knight Frank

Housing sales fell by 4 percent to 2,63,720 units last year, lowest since 2010, in the eight major cities of the country on account of demand slowdown in the real estate market despite interest rate cut by the RBI.

The National Capital Region (NCR) continued to be the worst performing market in India with sales and launches at six year low.
Launches of new homes fell by 21 percent in 2015 at 2,44,944 units in the primary market of eight major cities – NCR, Mumbai, Chennai, Kolkata, Bengaluru, Pune, Hyderabad and Ahmadabad.

Residential

Developers would take more than 2.5 years to exhaust this unsold stock.

While the office market grew from strength to strength, residential did not perform as expected. Residential segment continued to face slowdown with launches at a five year low, despite the festive season. “Sales in 2015 were lower than 2014 levels. Despite the 125 bps rate cut by RBI, demand did not see an uptake.

However, launches of new homes fell by 20 per cent to 63,458 units in NCR. The unsold inventory in NCR stands at 2.06 lakh units at the end of 2015.

The office space absorption stood at 40.4 million sq ft, highest since 2012, in six cities – Mumbai, NCR, Bengaluru, Chennai, Hyderabad and Pune. Delhi-NCR witnessed absorption of 7.4 million sq ft of office space last year.

Grab This Opportunity – Time To Go Overweight On Equities

The recent correction in the markets coupled with our belief that crude oil prices may bottom in the near term, has presented us with a good buying opportunity in equities.

One important investment lesson we learnt over a period of time is that whenever there is selloff in equities led by non-fundamental reasons, it is a good time to buy quality largecaps stocks. The recent sell-off by foreign institutional investors has been mostly due to non-fundamental reasons. While oil exporting countries have been exiting investments in India due to the fall in crude oil prices, another set of investors have been selling as emerging markets as an asset class hasn’t performed well as compared to developed market. We had similar opportunities in 1998, 2002, late 2008 and 2011.

INDEX RETURN

Today, India is well-placed in terms of its macroeconomic situation. India has low inflation, low current and fiscal deficit, and a stable government till 2019. The fall in crude oil has also benefitted the economy considerably. With crude oil prices below $30 per barrel, gain for India is approximately Rs. 5,00,000 crore. This is a considerable amount of saving which can be productively used by the government to boost the economy.

Investment strategy is based on four factors – valuation, trigger, flows and sentiment. All these factors indicate that today is a good buying opportunity.

Valuations today are relatively attractive. At a time when India’s macroeconomic indicators are strong, benchmark indices are at 52-week lows. However,Midcaps still appear overvalued and hence, opportunity clearly lies in the largecap space.

– The major trigger that happened over the weekend was lifting of international sanctions on Iran. This may bring about a bottom in oil prices followed by a subsequent recovery.

– FII flows are negative and the sentiments are full of pessimism due to worries on falling crude prices and slowdown in China. This works well as per our investing framework, as this is the time that can be good investing occasions for long term equity investors.

We believe that corporate earnings will recover after the equity market gains and hence, waiting for corporate earnings to recover could pose a risk of missing the entire bull cycle. Most companies are running with ~70% capacity utilization and in the next two years, we believe that capacity utilisation will increase without the companies having to incur any incremental capital expenditure and will help earnings growth.

As far as the Union Budget is concerned, we don’t expect the government to increase taxes this time as the amount of tax collected this year has been significant and there is enough scope for government to increase spending which can help revival in the economy.

To summarize, we believe current selling by FII is due to non-fundamental reasons and has given an opportunity for domestic investors to invest aggressively in equities. We recommend investors to go moderately overweight in equity immediately and go completely overweight when oil prices appears to be bottoming out and likely to recover.

Review by S.Naren

FUND HOUSES + FUND MANAGER’S= FUND’S PERFORMANCE

Many fund houses & there number of schemes are operating in the financial market. Launching new schemes, merging of the existing schemes & closing of the schemes is ongoing continuous process in the market. Closely monitoring the performance of these schemes & to keep its track record is interesting but tedious work.

Though there are more than 5000 scripts in the Indian market but investable & tradable scripts from mutual fund aspects are approximately not more than 2000 (on the basis of company’s performances & future prospects).All the fund managers more or less invest in these scripts only as per there scheme’s objectives but inspite of it when we check & compare scheme’s performance with other schemes in the same segment we find significant amount of variation.

Various factors affects the scheme performance & to understand it, one should know the working of these fund houses & their fund managers.

Every fund house has their own panel of investment comprising CEO, number of experts & analyst, which selects the stock for investment after screening of the company balance sheet, fund flow & cash flow statements management’s objects & guidelines, past performance, future targets. Members of this panel even conduct several rounds of discussion to get the clear ideas of the company policies, & its strategic implementations to achieve the set goals.

mutual fund

On the basis of this analysis of every individual stock by its expert panelist, fund houses prepare the list of stocks comprising between 125 to175 scripts for their fund manager’s investments. Expert of these fund houses continuously monitor the major decisions & performance of these companies. Addition & deletions of the scripts from the approved list on the basis of their performances & economic trends is continues ongoing process.

This panel also closely monitor & keep the track record of the existing schemes of their fund houses operating under various fund managers. They check the nature & objectives of the scheme, portfolio size & in its line investment decisions taken by the fund manager, return on investment, portfolio turnover, risk exposure, expenses ratio. If required frequently they interact with fund managers, share views with each other’s & provide some valuable inputs as well.

From the given list of approved stocks fund, managers are suppose to select stocks for their investments & are strictly not allowed any other stock not approved by the fund houses.

But there some areas in which fund houses say remain final such as cash holding, risk analysis, maximum holding in any company, portfolio turnover etc. There are principle guidelines of every fund houses extend to their fund managers but it does not restricts fund manager’s scope & freedom.

Fund manager’s have liberties to select any stock from the given list, to decide about the sector’s weightage, investment to any company to the maximum permissible limits ( as per SEBI & fund house guidelines),purchase, repurchase of stocks, determining the holding period & sale of these stocks. They can consider high valuation stocks with good returns or economic stocks with risk free growth potential.

Fund managers are suppose to take their decisions in all the above mentioned issues, keeping in mind the nature & object of the scheme, risk factors analysis, & expected return on investment. For e.g. :- Balance fund’s manager is not suppose to have aggressive equity investment approach compare to pure equity fund.

Fund managers are allowed to use any strategy for their investments. Mainly there are two strategies used by the fund managers. First is Top-Down strategy (means analysis of the economy & accordingly anticipate the industry/ sector will drive more benefits, generate better returns & investing in the companies belonging to those industry/sector. Whereas the second Bottom -Up strategy focused more in the fundamentals of the company emphasis on the balance sheets analysis, peer group analysis, PE ratios, PE multiples, with logic that company will perform on the basis of strong fundamentals regardless the economic conditions & trends.

World Bank cuts global economic growth Forecasts

Global growth should accelerate to 2.9 per cent this year from 2.4 per cent in 2015, the bank said, but that still represents a downgrade from its June forecast for 3.3 percent growth.

Among BRICS, India is the only one expected to see notable improvement in economic performance from 2015 – advancing at a 7.8 percent rate in 2016 versus 7.3 percent in 2015.

The U.S. economy should grow by 2.7 percent, down from an earlier estimate of 2.8 percent but up from 2015’s 2.5 percent.

world bank

Estimates for growth in the euro zone were trimmed by the same amount, to 1.7 percent from 1.8 percent previously, although that would mark a modest acceleration from 2015’s estimated 1.5 percent rate.

The bank forecast the Russian and Brazilian economies would continue to contract in 2016 rather than return to growth as it had estimated in its previous outlook in June.

China GDP growth was estimated to slow to 6.7 percent in 2016 from an estimated 6.9 percent in 2015. In June the bank had estimated 2016 growth of 7.0 percent.

In Brazil, GDP is forecast to decline by 2.5 percent in 2016 compared with an earlier estimate for growth of 1.1 percent, the World Bank said. The Brazilian economy likely contracted at a 3.7 percent rate in 2015.

2015 : A blockbuster year for Indian IPOs

India’s initial public offerings (IPO) jumped more than nine-fold in 2015 and raised the most money in five years, while the value of some shares doubled from their offer price.

In the year 2015, 20 IPO’s were launched as compared to five in 2014, the highest number since 2011, when 37 IPOs were launched.

Of the IPOs launched in 2015 on the BSE’s main platform, performance varied from a gain of 98.8% to a loss of 26%. But on average, IPO shares gained 23.5% from their listing to date.

Indian firms has raised Rs138.62 billion through IPOs in 2015, compared with Rs14.68 billion in 2014, according to reports, which tracks local markets. Indian firms raised Rs375.35 billion through IPOs in 2010.

A major revival was witnessed in the IPO market after four disappointing years.

Click the chart for more details.

IPO LIST 2015

Please visit BSE / NSE websites for current stock quotes & charts.

Top 10 Indian Companies Burdened With Debt

The Reliance Group

The Anil Ambani-led Reliance Group is in the business of power, insurance, wealth management, telecommunication infrastructure and entertainment. In March 2015, the company had a debt of Rs 1.25 lakh crore on its balance sheet.

The Vedanta Group

Anil Agarwal’s company is the second-most indebted company. According to Credit Suisse, the company, which is into metals and mining, had a debt of Rs 1.03 lakh crore.

Essar Group

Managed by the Ruia Brothers (Shashi Ruia and Ravi Ruia) the company, with operations in 25 countries, owes Rs 1.01 lakh crore.

Adani Group

Gautam Adani, the chairman of the Adani Group of companies is known for his proximity with Prime Minister Narendra Modi. His business house owes Rs 96,031 crore to the banking system.

Jaypee Group

Manoj Gaur-run Jaypee Group has a debt of Rs 75,163 crore on its balance sheet. Jaypee Group had a golden time during the Mayawati rule in Uttar Pradesh between 2007 and 2012.

Debt

Jindal Group

As per the Credit Suisse report, the group has a debt of Rs 58,171 crore.

GMR Group

Named after its promoter GM Rao, the group is known for building Delhi’s T3 International Airport terminal.
The group has a debt of Rs 47,976 crore on its balance sheet.

Lanco Group

Headed By L Madhusudan Rao, the company runs solar and thermal power plants. It has a debt of Rs 47,102 crore.

Videocon Group

Venugopal Dhoot’s company, the group once famous for making televisions, owes Rs 45,405 crore to banks.

GVK Group

Founded by GVK Reddy, the group has interests in energy, infrastructure and hospitality sectors. The company has a debt of Rs 33,933 crore.