US President George W Bush and his men know that if the $700-billion rescue plan falls through, US bank Wachovia and a few more institutions will become history over the weekend.
The market meltdown has spread to high-street commercial banks, with Washington Mutual (WaMu) going down in the biggest-ever bank failure.
Staring at nearly $19 billion worth of losses on bad mortgage, WaMu’s branch network was acquired by JPMorgan Chase for $1.9 billion. There are growing fears that absence of a bailout could badly hit other institutions like Wachovia and Morgan Stanley.
The 50-share Nifty closed at 3985.25 points, down 124.30 points, or 3%, over the previous close. Market watchers said the latest downtrend could spark off a vicious circle, as traders sell off their long positions out of inability to meet margin requirements, thus deepening the fall.
Rumours are that many promoters, especially in the real estate sector, are facing margin calls on funds borrowed against pledged shares.
While leading traders have scaled down their activity over the past couple of weeks, the continuing slide could force even patient investors to book whatever profits available on their long-term holdings, brokers said. So far, leading broking firms have only deferred their expansion plans, and stopped fresh recruitment.
But if the downtrend continues for some more time, these firms could start firing employees, said market watchers. Domestic institutions pumped in Rs 543.57 crore on Friday, as per provisional data on the Bombay Stock Exchange (BSE).
The saving grace, so far, has been net inflows into mutual funds and unit-linked insurance plans (Ulips), and the absence of large-scale redemptions. But that has been of little help in the face of sustained selling by foreign institutional investors (FIIs), who have pulled out Rs 643 crore on Friday.
The total traded turnover on both exchanges fell to Rs 60,000 crore compared with the daily average turnover of around Rs 70,000 crore in the past couple of weeks. Reliance Industries, Tata Steel, State Bank of India, Mahindra & Mahindra, ICICI Bank and Infosys Technologies were among the prominent losers, shedding 3-5%.
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Realtors are now taking a more efficient and cost cutting route in the development of their projects. They are trying out new strategies to improve margins. While some are procuring expensive capital goods directly from manufacturers, others are going to China to get high quality yet cheaper material. In the last one year, developers have seen their margins shrink progressively with input costs going up tremendously. Margins for developers were high in the 60-70% range for most projects (and over 100% in some) a couple of years back. Today, they are down to about 30-40% across India, says Mr. Anuj Puri, chairman and country head, Jones Lang LaSalle Meghraj (JLLM).For more view- realtydigest.blogspot.com