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Wednesday, April 23, 2008

Why doesn't the Govt. control Realty Prices??

The government's threats of price control to the steel & cement sectors have been keeping the prices of shares in these sectors down. If the govt. thinks that these sectors are behaving as a cartel, then there are bigger cartels in other industries. Why doesn't the govt. control prices of real estate? Buying a house has gone beyond the reach of the Indian middle class. Prices of housing have gone up threefold in the last two and and a half years. A flat in Mumbai which used to cost 50 lakhs two years ago, is now quoting at 1.5 crores! It's impossible to buy a 3BHK flat in any decent area of Mumbai for less than 1.5 crores. Can the Indian middle class afford that? To my mind, the whole vicious cycle of inflation started with the sky-rocketing prices of real-estate in India. Everything else followed. Has the govt. taken any action on the Builders' cartel?

There is another cartel in the Pvt. Banking space. The charges these banks are levying from their customers for demat transactions, maintenance and other services are exhorbitant. Has the govt. taken any action on them? There is another cartel in the Food sector. The prices of food items like grains, fruits, vegetables, milk etc. have gone up a lot in the last two years. Has the govt. issued a threat to them for bringing down their prices?

So why is the govt. singling out just the steel and cement sectors for price control? In an overall inflation scenario, which is across the board, such targeting of the steel & cement industries is ridiculous.


Sunday, April 20, 2008

Market Outlook

Hi friends,

At the outset, let me apologize for not being as active on this blog as I used to be. It's just that I've been awefully busy lately. I'll try to answer individual queries (time permitting) but please feel free to answer each other's queries if you wish to.

Now for my current views on the Market situation. The market has seen a very nice bounce from the lows of this year in the last three weeks. But the big question is whether this move is sustainable or whether this is a dead cat bounce. My reading is that even if we have put the worst behind us, things are not going to be all hunky dory from now on for the rest of the year. The market may still take about 2-3 more months to stabilize and a positive, sustainable uptrend may be seen from August-September onwards. As predicted by me in my New Year blog, IT and Pharma Sector stocks have outperformed the market so far. The biggest concern for the Indian market right now is inflation and cement, steel sectors have been under threat by the govt. as being price control candidates. But my point of view on Cement is that it is a good time for long term investors to get into this sector as pressure from the govt. is only a temporary sentiment dampner. On the ground, the fact is that there is a very robust demand for Cement and business is good.

The bad news coming from the US may also take a few more months to end, and only after the US Markets stabilize will our market see a sustained positive move. This market is presenting an opportunity for long term investors to invest in high quality, low PE - high growth stocks. Unfortunately, there is not much to do for very short term traders right now. Traded volumes are very low and there is a lack of interest from the retail investors who were badly hit by the crash early in the year. At this point, the likely trading range for the Sensex for this year seems to be between 14500 and 21600.