Deepak Shenoy

Why the U.S. Credit Crunch Will Not Affect India

I live in Navi Mumbai and travel a lot to Gurgaon and Bangalore, and keep tabs on real estate in both places (relatives and friends are investors here). Prices are coming down and supply is at phenomenal levels. Ghost buildings (complete but zero occupancy) are the norm here in Navi Mumbai and gurgaon and outer bangalore head that way. CBD in Bangalore is starting to crap out - deals are just not happening.

Even in Mumbai deals have fallen though, auctions have failed and prices are dropping fast despite builder cartels vowing to keep them stable.

Gurgaon and Dwarka have a massive oversupply coming up and you can see this happening as builders delay possession (lack of final payments because investors aren't finding buyers).

Real estate loans are comign down - growth slowed to 20% last quarter, and with a CRR hike, rates stay high, andloan offtake slows.

We have our own version of subprime - if people default here, banks have a long long foreclosure process, and recovery can take years.

It may not be US Subprime that affects India - it was never that, we had our own bubble - but the bust will typically take 5 years before growth starts again. Cycles in India have been 10 years long - the last highs were 1985-87, then 1994-96, and then 2005-07. I expect the bubble to have bust completely by 2011.

But it's a non transparent market, so we will only know much after the fact.

India's Selloff: How Bad Can It Get?

I'd written about this at:

blog.investraction.com...

As of Feb 7, the Nifty EPS grew only 13%. Dividend yield in India has always been of the order of 2% or so so let's leave that out. The P/E then was 22 trailing.

The Nifty was at 5133 at the time, down a staggering 1000 points from the Jan highs.

As of today we're at 4600 on the Nifty, a further 500 point drop from when I wrote the article - another 10%. Though to be honest this 10% has happened in the last one week.

I'm still confident we'll recover after a few years, but bottom fishing should happen at the 3500 levels on the Nifty (corresponds to 12000 on the Sensex). My first buy point is 4000 (14,000 Sensex).

Disclosure: Short the index. (Was not short when I wrote the article)

Seeking Alpha in Indian Real Estate

Prices are already going down in India (though urban real estate and condos are hugely valued and people tend to pay huge premiums as compared to the US, even in a slump). Specifically, in Bangalore panic pricing is setting in. Even in Delhi and Mumbai prices have slowed down and there aren't too many transactions happening - both in commercial and residential real estate.

I'm in India and I can short them all - but I just don't think it's right to do it now. The national budget, usually a big important thing here, is up on the 29th and could contain sops for the sagging real estate sector, or for real estate investments in general. 29h is also the first day after the current month's futures expiry so if I had to short, I'd choose the end-of-day of the 29th to start.

Equity Investors in India Poised for Disappointment

hi Vivek,

The Sensex data you use does not use trailing 4 Q earnings. It uses the last annual reported earnings.
See my article on how I figured that out.

The P/E expansion is not as much as you might assume. At current values the BSE reports a P/E of 19, but it's actually around 16.4 considering last 4Q earnings. Do you think it'll still stay unattractive at a 16.4 PE?