Market may stay bearish, realty to bear the brunt MUMBAI: The broad trend for the week appears bearish, though market watchers are hopeful of a temporary bounceback if the bill supporting the bailout plan for financial institutions is approved by the US Congress.
Most brokers say the near-term outlook remains bleak in the face of sustained foreign fund outflows and worsening macro-economic fundamentals. "The situation on the real estate front looks particularly bad," says Antique Securities director Rohit Kothari. "Demand for property has dropped sharply, and this will have a cascading effect on sectors like cement and steel, which had benefited immensely during the recent boom in construction," says Mr Kothari, who is bearish on the overall market. Real estate shares have been among the worst performers in recent times, and this trend is expected to continue. Brokers say traders have suffered heavy losses in the past couple of weeks, and this has limited their ability to take big bets. The key concern is that a further slide would spark margin calls for traders who have pledged shares in lieu of margin money, and for promoters who have borrowed against their company's shares. Bulls may still get a reprieve if the $700-bn bailout plan is approved by the US Congress. "The proposed bailout looks good in general for equities but bad for US bondholders," said Nomura International (HK)'s analyst, Sean Darby. "Short-term equities are moderately oversold and are under-priced versus risk. We expect Asia and emerging markets to outperform developed markets in the short term," he added in a note. The brittle state of the US financial sector has sparked hopes of a rate cut by the Fed. So far this year, 13 financial institutions in the US have succumbed, with the latest casualty being Washington Mutual, but market observers do not seem to be sure that the end to this string of failures could be nearing. The implication of such a crash on emerging equities, including India, is that these financial institutions may liquidate their positions there to cover up for the losses or to meet client redemption back home. In an interview, UTI Mutual Fund senior manager Sanjay Dongre said the unwinding of leveraged positions in Indian equities by foreign institutions will likely sustain at least over the next couple of months. In 2008 so far, foreign institutions have net pulled out $9.3 bn from Indian equities, partly causing benchmark indices to correct roughly 35% from its peak mid-January. Learning Center- http://learning.investorline.co.in/ Mutual funds - http://mutualfunds.investorline.co.in/ Life Insurance - http://insurance.investorline.co.in/ Last week, indices declined close to 7% from the previous week, posting one of its biggest weekly drop in a little over six months. "Sentiment is still fragile and is in what we could call 'buy' territory but not in 'screaming buy' territory. However, when combined with fundamentals and valuations, the sentiment indicator suggests that markets could fall further," said Morgan Stanley's strategists in a note. Investors are awaiting the July-September or second quarter earnings of Indian companies, starting next month, to get a sense of the health of corporates, which will enable them align valuation expectations accordingly. Broadly, analysts expect companies' sales growth for the quarter under review at 20-22%, while profit growth at 9-12%, the slowest in the last couple of years. This quarter, companies' earnings and margins will reflect the negative impact of higher input prices and rising interest rates. Investors will also keep a watch on the extent of impact of derivatives on earnings. Visit site at – http://investorline.co.in/ Learning Center- http://learning.investorline.co.in/ Mutual funds - http://mutualfunds.investorline.co.in/ Life Insurance - http://insurance.investorline.co.in/ Investor Forums- http://forums.investorline.co.in/ Iwebs Open Source Web Publishing Platform - http://webs.investorline.co.in/iwebs/ --~--~---------~--~----~------------~-------~--~----~ Get latest market updates & search internet right from your browser-download our toolbar here- http://investorline.ourtoolbar.com/ Visit our site at – http://investorline.co.in/ Newsroom: http://newsroom.investorline.co.in/ Learning Center- http://learning.investorline.co.in/ Mutual funds - http://mutualfunds.investorline.co.in/ Life Insurance - http://insurance.investorline.co.in/ Investor Journal - http://research.investorline.co.in/ Newscatcher- http://catcher.investorline.co.in/ Interested in Financial Planning-Let us Contact you- http://spreadsheets.google.com/viewform?key=pb_z4f1_zGMg4iBBFT3-SWQ&email=true If you like the site then promote it here- https://www.freetellafriend.com/tell/?url=http://investorline.co.in/blogs/news Create your own free blog on- http://investorline.co.in/blogger Visit this group at http://groups.google.com/group/india-investor -~----------~----~----~----~------~----~------~--~---
