|»5 Minute Wrap Up by Equitymaster|
On This Day - 17 JUNE 2008
Real estate's explosive growth prospects
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Sticking with its earlier forecast of the domestic economy outsizing the US juggernaut by 2050, the investment bank has gone on to add that India will have to work harder to achieve its goals. Is this an understatement of great magnitude? Since as per the bank's rankings of 181 nations, a random sample of 10 nations will result in 6 countries being ahead of India and only 4 behind! Not a very good position to be in especially when the country is in great need of foreign capital.
Apparently, Goldman has looked for 13 indicators including inflation, government deficit, external debt, investment rates, openness of the economy, personal computer penetration, phones, internet, education, political stability, corruption etc. Need we say where do we score the least?
While this definitely is music to the years of real estate developers, most of whom have seen their market caps erode at a fast pace in recent months, imagine the magnitude of demand that it will trigger in other related sectors like cement and steel.
The numbers too seem to be pointing towards China, whose growth in recent decades has been the toast of the world and has made the nation a key driver of global economic growth along with the US. India though seems to have its foot in both the boats and is moving full steam ahead with even results that fall between the two approaches.
But if the past history is any indication, straddling both the worlds have proved to be a difficult proposition. So far, only Novartis has been successful in managing both an innovator drug company and a generic company. If the innovator companies do indeed decide to embark on acquisitions, India is likely to emerge a hot bed of activity what with the Indian pharma space littered with such companies.
It further states that non-OPEC producing countries having likely reached peak production and geopolitical issues in the Middle East are two major reasons supporting the premise of a supply-induced shock. Particularly, the recent tensions between Iran and Israel have brought to the fore the possibility that there is not enough global spare capacity to extract oil, with OPEC nations seemingly reluctant to increase output and non-OPEC production having stagnated. No wonder then that Saudi Arabia's decision to raise production by 500,000 barrels per day was greeted with much cheer sending the global stock market indices on an upward path.
Companies across sectors are going in for cost cutting methods to maintain their margins. This impact has been witnessed specially in hotels in business hubs such as Bangalore and Hyderabad wherein many of the hotels had gone in for capacity expansions in the recent past to cater to the growing demand of the hospitality segment. With new supply expected to come in the near future and slowdown in travelers, the occupancy levels are expected to further decline. Tough times indeed!
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