RBI could announce a rate hike in Dec/Jan

The strong surge in the GDP figures for the July-September period at 7.9% as compared to 6.1% in the previous quarter. The growth in the GDP was mainly driven by the manufacturing and services sector. With the economy responding to the various policy measures taken by the government, we can expect that RBI would withdraw its stimulus measures slowly. It is expected that RBI would announce a hike in interest rates in the months of Dec/Jan as against the previous time frame of March 2010 so as to contain the rising inflation.

Strong rebound in Emerging Markets

On the last day of November, Indian shares rebounded strongly, as GDP data for the quarter ending September 2009 was better than expected and also because of easing of concerns about debt failure in Dubai. Emerging Markets stocks across the world too rallied as Abu Dhabi announced its intention to support Dubai banks. Investor concerns of the last week, proved to be a small blip, with dollar declining against other leading currencies and commodities rising higher. While realty stocks too rebounded in India, investors will still be cautious about investing in the forthcoming IPOs at current valuations.

Indian Real estate IPOs may lie in cold storage for some time

The impact of the Dubai World debt crises will not only be felt in the Middle East markets, but also on the Indian Real Estate Market. The Indian Real Estate initial public offerings such as Emaar, Lodha, Sahara and slew of others will find the going tough in the next few months. The global liquidity boom has driven stock valuations higher as compared to earnings in the Indian Real Estate sector and we might witness a downward correction in the Indian Market in the coming weeks.

Why property prices will rise

Foreign funds have pumped in about $ 16 billion into Indian stock markets this year. After the negative inflows last year, the FII investments are reaching the peak 2007 levels. The stock markets are reaching for the stratosphere and valuations are defying the stock fundamentals. Meaning today's valuations are way ahead of earnings.

The next asset class in the scheme of things of global fund houses after speculation in gold this year, is likely to be property. With banks slush with funds and no incremental domestic demand, liquidity in the banking system is high. We expect that land prices will rise in the coming months as a result of money flow into the system. Meaning, land rates are likely to be at inflated levels, and the excess committed by the builders and the banks in the previous cycle could very well return soon. In the fast changing global economic environment, business cycles, which earlier used to last for about 5-7 years are likely to get shorter to 2-5 years.