Markets peg hope on pro reform push

Gold demand is on the wane, and non-metro segment is driving property market. Stock market, though revving up, is keenly looking forward to Modi government for any cues. Meanwhile, MF schemes are affording a steady return

Hyderabad: If one goes by the numbers presented by realty consultants, investment is turning dead in properties, as the demand is very feeble and sales are declining. The National Property Index (NPI), an indicator of property market by Magicbricks.com, is almost stable for the last 18 months. For the quarter ended March 2015, it was at 144%, which was the same in December 2014.

Another real estate adviser, the PropTiger.com, also portrays a similar picture. According to the agency, property sales across the nine cities (Ahmedabad, Bengaluru, Chennai, Gurgaon, Hyderabad, Kolkata, Mumbai, Noida and Pune) fell by 34 per cent in March. It says inventories are piling up and have risen by as much as 50 per cent in December 2014 in comparison to those in June 2012.

When the stock markets are down, PropTiger says, the property prices rose over 100 per cent. For instance, in the up market area in Delhi, the prices almost doubled between March 2010 and 2013. But, now the prices are stagnant and the property segment is slowly losing its eminence as the most-sought-after asset class.

According to Magicbrick, even Hyderabad market has recorded 17 per cent drop in the sales. However, reports indicate spurt in the real estate activity, especially in the non-metro segment, while the stock markets are buzzing with action and investor mood appears to be bullish as the Modi government is determined to push reforms and bring down the fiscal deficit to FRBM levels.

It is true the stock markets offered over 50 per cent return in 2014, much above the index, thanks to Narendra Modi’s wave that ruled the markets then. However, Modi needs numbers to see the reform bills pass in Rajya Sabha, a pre-condition for markets to go up any further. The Dalal Street is still skeptical in view of persisting uncertainties in the economy and apprehensions over the Modi government’s ability to push through pro-market reforms.

The stock markets witnessed a sharp fall in the recent past. Volatility drives away small investors. Meanwhile, another asset class, gold, is also losing sheen. According to reports, investment in gold yielded over 9 per cent annually in the last five years, as it climbed to Rs 26,550 in mid-April, 2015, from Rs 16,778 in 2010.

At present, a strong dollar, bullish stock market are weighing on the yellow metal, and the physical demand is coming down by 9 per cent in the first quarter in this calendar year, according to the World Gold Council (WGC). But the monies are flowing into mutual funds (MF). Industry numbers say equity-linked MF schemes are growing at 30 per cent in the current year. The retail investment in mutual funds increased to 1.8 lakh crore by December 2014, from Rs 1.2 lakh crore in the fiscal 2013-14. Even the demat accounts rose to 23.3 million in 2015 from 21 million in 2014.

Although, it is not possible to ensure higher returns against any asset class, the analysts point to a sustained bullishness in investor sentiment since late 2013. And, they hope it would continue even in 2015; their optimism notwithstanding, only sheer results, not mere expectations, would sustain the sentiment.

By:KVVV Charya