Indian Markets Monday Wrap-Up: Mobius Calls Bottom for Emerging Market Stocks

The benchmark indices spent most of the first part of today’s trading session almost flat. However, the indices steadily slipped into the red thereafter, on the back of selling in the index heavyweights. The Sensex closed lower by around 170 points, while the Nifty closed lower by 40 points. Stocks from the mid-cap and small-cap indices also ended in negative territory. Stocks from the FMCG and consumer durable sectors led the pack of gainers on the bourses today. Rupee closed at 47.86 against the US dollar. While Asian markets closed mixed, the European indices are currently trading in the red.

As per a leading business daily, Unitech has sold its 200 room Marriott Courtyard hotel to Gurgaon hotel for Rs 2.65 bn. A part of those funds (Rs 500 m) will go towards servicing the debt taken from banks. Unitech also has plans to sell another hotel project in Kolkata for which they are yet to start construction. However, with the significant amount of debt on the company’s books, investors would be wary to invest in the project during the initial stages and would be likely to enter only towards the project completion stage. The stock of Unitech ended the day on a firm note.

Athletes and delegates scheduled to arrive in India for the New Delhi Commonwealth Games 2010 are likely to face a shortage of hotels to stay in. According to the Federation of Hotel and Restaurant Associations of India (FHRAI), less than 50% of the proposed room inventory of 40,000 is likely to be ready in time for the games due to the liquidity crunch the hotel industry is facing. Hoteliers and developers are short of funds to the tune of Rs 120 bn to complete the construction of these rooms. Around 18 large projects in the National Capital Region have not been able to start construction due to the liquidity crunch. It may be noted that Delhi currently has 10,000 rooms across all segments. This may turn out to be a positive situation for hospitality companies like EIH and Indian Hotels as they will command higher room tariffs. EIH ended the day almost flat, while Indian Hotels ended in the red.

India has lifted a ban on cement exports on the back of a slowdown in domestic demand due to a dip in construction activity and a softening of cement prices. The government had initially banned cement exports in May as part of efforts to increase supplies in the domestic markets and check rising prices. Construction activity has slowed down in recent months due to the negative effect of high interest rates on the demand for new homes and deferment of expansion plans by companies due to the ongoing credit crunch.

As per Mark Mobius, ace investor and executive chairman of Templeton Asset Management, stock markets in emerging countries may have already bottomed out and 2009 will be the start of a new bull run. “We’re beginning to see this bottoming situation. I sincerely believe that next year we’re going to begin the next bull phase”, he said.