TODAYS MARKET

Persisting with their volatile behavior, the benchmark indices continued to move around the dotted line during the closing hours of trade, ending virtually flat. While the BSE Sensex edged higher by around 8 points, the NSE-Nifty closed 7 points below yesterday's closing. The BSE Midcap and BSE-Smallcap indices also showed a similar trend, ending marginally below the dotted line. Advance to decline ratio on the overall BSE was poised at more than 3:4.

While Asian indices closed mixed today, most European indices are trading in the red currently. The rupee was trading Rs 47.7 to the dollar at the time of writing.

The market's nervousness is not entirely unexpected. With the September quarter results around the corner, it may not want to move too much on either side, only to find itself ending up overreacting. Even the undervaluation, the overriding reason for the markets to keep rising until now, seems to have run its course as we believe that the markets are in the fairly valued territory right now. Hence, without any clear direction until after the arrival of the September quarter results, volatility could be the order of the day.

After we mentioned yesterday that a few real estate companies in India are mopping up Rs 100 bn from the primary markets by way of IPOs, two more have joined the race. As per a leading daily, Pune based Kumar Builders and Mumbai based DB Realty have filed their DRHPs (Draft Red Herring Prospectus) with market regulator SEBI and would be looking to Rs 20 bn combined.

While we are happy that the sector companies are getting access to capital, we are equally worried that the relief has come sooner than expected as the lessons from the last bust may have not been fully learned. In other words, this fund raising spree could lead to another mad scramble for buying land banks and could push the real estate prices to unsustainable levels in some pockets of India. Hence, we urge investors to remain watchful and not get carried away by lofty promises and instead, have a through look at the company's track record and its ability to scale up.

It's not just the real estate companies that are looking to cash in on the positive investor sentiment prevailing in the markets currently. The Government too, with its high fiscal deficit to take care of, is showing a pretty aggressive intent.

After putting companies like NHPC and Oil India under the IPO hammer, five more PSUs are waiting in the wings, expecting to raise funds by the end of the current fiscal. As per a leading daily, the first to go off the blocks could be the follow-on offerings in power financing company REC or power generation behemoth NTPC. Interestingly, one of the two state run companies that have already come out with their IPOs was also a power sector company called NHPC. The reasons may not be difficult to find. Not only are power companies highly capital intensive, there is enormous shortage of power in India, leading to the sector companies achieving a prominent place in the fund raising scheme of things. The sector stocks like NTPC and Tata Power ended weak today.