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Sunday, December 21, 2008
Don't expect property prices to go down
Despite talks of recent downturn in property prices, developers are unlikely to reduce prices, as the realty players feel that their properties are well- priced, says industry body FICCI.
"Voluntary reduction of property prices are not on the cards of developers. Barring very few developers, who have already reduced their prices, majority feel that their properties are rightly priced," said the Chamber in its latest study on the scenario of property prices in the country.
According to the report, developers may cut prices "by 10-15 per cent and not beyond only if the situation does not improve in the next few months".
The study underlined that developers seemed to have realised the need for affordable and mid-range housing to survive the current slowdown.
FICCI also said due to higher risks of investing in real estate, the sector would witness lower private equity deals in the next 12 months, as funds would not be easily accessible.
"...valuations are expected to go down further and the costs are going to be very high for developers," it added.
Regarding housing projects, FICCI said: "After having reached its peak, residential real estate in India will witness a steady down cycle for next few months. There is time and cost overrun in the existing projects while new projects are being deferred."
Such a situation would eventually lead to a reduction in price in the coming four quarters and the market was expected to turn in favour of end-users, the report said.
According to the industry body, high interest rates have dwindled the demand for properties, while scarcity of funds and slimming of liquidity have affected the supply side on commercial real estate.
"The corporates are postponing their expansion plans as they are expecting the prices to fall further. Instances of deferment in projects and delays in execution of ongoing projects are numerous," it said.
An increasing number of developers are now shifting their focus to demand based developments due to oversupply of commercial spaces, the report added.
Stating that many realty firms have diversified in the recent times to counter falling sales in the property market, FICCI said: "To beat the slowdown, some prominent companies are considering entering new areas like coal mining, big-ticket irrigation projects, transmission lines, telecom and core infrastructure projects."
On the PSU banks' recent reduction in interest rates, the report said that the upper limit of the special package for home loans should be increased to Rs 30 lakh from the current Rs 20 lakh.
FICCI has suggested measures, including simplification of land-holding framework, single-window approval for projects, use of technology to keep land records and release of more urban lands, for a healthy functioning of the realty sector.
In addition, the report has suggested allotment of higher floor space index (FSI) for integrated township projects to make properties more affordable.
Weekly Technicals - looks overbought
Sustained buying support in select index heavyweights helped the Sensex cross the 10,000-mark last week. The index moved in a much narrower range of 555-odd points last week from a low of 9,633 to a high of 10,189. The Sensex finally ended with a gain of 410 points at 10,100 on Friday.
Among the index stocks, Tata Motors, ICICI Bank, Grasim, HDFC Bank, DLF, Hindustan Unilever, NTPC, ONGC and Mahindra & Mahindra gained 10-16 per cent each. On the other hand, Satyam slumped 26 per cent to Rs 163. Reliance Communications dropped 13 per cent to Rs 249 and HDFC shed 7 per cent at Rs 1,636.
With the index crossing its first major hurdle on the monthly charts, the Sensex is now likely to move up to 10,700 in coming days. However, as the index has reached an overbought zone, some amount of profit-taking cannot be ruled out. The 14-day RSI (Relative Strength Index) is almost 72 per cent. An RSI of above 70 per cent is said to be overbought.
On the upside, the index is likely to face resistance around 10,310-10,380-10,445, while on the downside, the index is likely to find support around 9,750-9,670.
The NSE Nifty, too, moved in an extremely narrow range of 184-odd points from a low of 2,923 to a high of 3,107. The Nifty finally ended with a gain of 156 points at 3,078. The index appreciated more than 1 per cent last week compared with the Sensex. While the Sensex was up 4.23 per cent, the Nifty gained 5.35 per cent. Hence, the Nifty was able to scale past the 3,040-level, while the Sensex ended at 10,100.
In doing so, the Nifty has also managed to close above its mid-term (50 days) moving average after 62 trading days. The mid-term moving average is now at 2,953 and the short-term (20 days) moving average is at 2,815. The short-term moving average has to cross the mid-term moving average for the uptrend to sustain.
This week, the Nifty is likely to find support around 3,005-2,985-2,965, while resistance on the upside would be around 3,148-3,170-3,190.
Saturday, December 20, 2008
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