SERVICES THE DRIVER FOR OFFICE SPACE

At a time when the real estate sector is slowing down, the services sector is expected to keep good the demand for office space with an estimated absorption of 28-30 million sq ft by the year-end, industry experts say. Being the largest contributor to the GDP (nearly 63 per cent), the services sector is likely to drive demand for commercial real estate, Jones Lang LaSalle India Senior Research Manager Subash Bhola said. "An 8.5 per cent growth in the services sector in FY12 is an indicator that a major slowdown in office real estate demand is not likely to occur as it generates the highest demand for office space," Bhola said. The service sector comprises banking, financial services and insurance (BFSI), information technology, consulting, trade and communication. The absorption is likely to be stable in short-to-medium- term, mainly on the back of ready or near-ready supply, Cushman & Wakefield South Asia Executive Managing Director Sanjay Dutt said. 

"The domestic office market is expected to remain stable in the short to medium-term and we hope to see stable absorptions to the tune of 28-30 million sq ft by 2012-end," Dutt said. According to a survey, around 21 million sq ft of office space was absorbed in Delhi NCR, Mumbai, Bangalore, Hyderabad, Ahmedabad, Kolkata, Chennai and Pune in the January-September period. "Even while IT/ITeS sector remains the largest in terms of volume in office space demand, the real drivers will be the BSFI sectors coupled with telecom, consulting, etc, that will keep the momentum upbeat in the next few months," he added. Dutt said office space is being looked at as attractive investment options at current values by both domestic as well as multinational companies, who are making strategic asset purchases here on the back of slight dip in prices.

FOOD SECTOR EMPLOYEES CONSUME COFFEE HEAVILY

People working in the food sector top the list of employees who need coffee the most at work, while journalists and PR professionals also figure among the top 10, a new survey has said. As per the survey conducted by global coffee and baked products major Dunkin' Donuts and human resource solutions provider CareerBuilder, professionals in food preparation and service businesses need coffee the most, followed by the scientists and sales representatives.
These are followed by marketing/public relations professionals (fourth), nurses (fifth), editors/writers/media workers (sixth), business executives (seventh), teachers/ instructors (eighth), engineering technicians/support staff (ninth) and IT managers/network administrators (10th). The survey results also showed that "coffee plays a major role in helping professionals perk up at work, as 43 per cent of those who drink coffee claim they are less productive without a cup of Joe."

The survey was conducted among more than 4,000 workers in the US by research firm Harris Interactive on behalf of Dunkin' Donuts and CareerBuilder on the occasion of the National Coffee Day on September 29.
As per the survey, 63 per cent of employees who drink coffee actually drink two cups or more each workday, while 28 per cent drink three cups or more.
The majority of younger workers need coffee for energy and motivation, as 62 per cent of workers aged 18-24 years said they are less productive without coffee, with 58 per cent of workers aged 25-34 made the same claim.
The survey also showed that coffee provided higher productivity boost for women workers. Overall, 43 per cent of workers who drink coffee claim they are less productive without their cup, while 47 per cent of female employees claimed they are less productive without coffee, compared to 40 per cent of male workers.

GOLD IS GOLD

Investments in gold have yielded higher returns compared to those in equity and real estate in India during the last three years, according to a study. Those who invested in gold between September 2009 and September 2012, have received double returns as the yellow metal has been their first choice for investment, a study released by industry body Assocham said. Presently, price of gold is over Rs 32,000 per 10 grams against around Rs 15,000 per 10 grams about three years ago. Hence, giving more than double the returns on investments, it said.
"Gold has really outdone other asset classes and it is likely to remain an attractive bet as long as uncertainty over the global economy stays" Assocham Secretary General D S Rawat said. He added that gold is the safest bet for investments amid uncertainty in other investment avenues. The prices of yellow metal saw a huge jump due to high prices of gold across the world and a weakening rupee. The study said those who invested in property have also seen good returns. However, these are comparatively lower than returns from gold. Investments in real estate have yielded almost double returns in cities such as Delhi, Mumbai, Chennai and Gurgaon in the last three years, it said. However, the study said the equity market has been the "worst performer", with investors witnessing erosion in wealth during the period under review.

IS IT ACHIEVABLE...

Leading US brokerage Morgan Stanley today said the BSE benchmark Sensex is likely to surge 25 per cent to cross the 23,000-mark by December, 2013. The 30-share barometer hit all-time high of 21,206.77 on January 10, 2008. The index would be trading at 14.9 times the estimated earnings of FY2013-14 to touch an all-time high of 23,069 by next year-end, the investment banker said in a statement, adding, the rally is likely to be driven by the cyclicals which are nearing ultra-cheap valuations. "Conditions for a new bull-market are getting slowly satisfied. The yield curve has stopped flattening, liquidity is improving, valuations appear supportive and profit margin expansion is a growing possibility in the coming months," the global financial services firm said in a note. Predicting a near 25-percentage points upside to the Sensex by the end of December 2013 (from Friday's close of 18,464.27), the firm said it is expecting the index earnings growth at 10 per cent this fiscal and a whopping 19 per cent in 2013-14, driven by ultra cheap cyclicals and energy and materials on which it is "overweight". The brokerage said, it is "underweight" on consumer staples, and "neutral" on industrials even as it has cut its technology exposure by 100 basis points. Attributing the bullishness to the new-found resolve from the government on the reform front, a Morgan Stanley said, "The decisive policy action at home (reduction in subsidies and opening up of FDI) and, more crucially, concerted action by the European and the US central banks have reduced the country's tail-risk linked to poor macro stability (the twin deficits on the fiscal and current account fronts)". "We are also trimming technology by 100 bps (1 per cent). Consequently, our average sector position has expanded, and we see this as our emerging strategy, as the average correlations of stocks to the market appear to be falling and no longer merits extreme focus on stock picking," it said. On the rationale for its portfolio picks, it said, "Our preference for quality cyclicals was already expressed last month. We now put money to work on cyclicals in our sector model portfolio. Accordingly, we go underweight on consumer staples and raise energy and materials to overweight, as well as taking industrials to neutral. Noting that the broad market earnings may have troughed or could trough in the current quarter, the note said "we have seen M1 growth put in a firm base and revenue growth should slowly accelerate in the coming months. Margins could rise in the coming months with a favorable base effect driven by the relative movement in the current and fiscal deficit. "Interest rates are already down y-o-y, and that should stem the steep rise witnessed in interest costs in the previous 12 months. The risk to earnings is that the investment rate collapses, although recent signals suggest that the public sector is starting to spend money," it said.

OVERSEAS INDIANS DISARRAY

As they confront a slowing economy and political gridlock, three-fifth of Indians are dissatisfied with the ways things are working in their country, a 13 percentage point decline in satisfaction since last year, a survey by a US-based research centre has said. The 13 percentage point decline in satisfaction is one of the greatest drops among the 17 nations surveyed by the Pew Research Center in both 2011 and 2012. "Nearly six-in-ten Indians (59 per cent) say they are dissatisfied with India's direction; only 38 per cent are satisfied," the findings of the poll said. It said Indians are increasingly gloomy about the economic future, and also worried about their children's economic prospects. Indian satisfaction now trails that in China (82 per cent), Germany (53 per cent) and Brazil (43 per cent), but still exceeds that in the United States (29 per cent), it said. Pew said falling satisfaction is coupled with widespread concern about the economy, especially unemployment and rising prices, which roughly eight-in-ten Indians say are very big problems. Nearly half of Indians (49 per cent) think current economic conditions are good, but such sentiment is down seven percentage points from 2011. Not surprisingly, Indians with relatively higher incomes are far more likely than those with low incomes to see the economy in a positive light, it said. According to the Pew poll, the Indian public is also pessimistic about the economy's future. Just 45 per cent of Indians think the economy will improve over the next 12 months, down from 60 per cent in 2011. "Again, richer Indians are much more likely than poorer Indians to be optimistic. The public outlook in India is far more circumspect than that of India's emerging market rivals, Brazil (where 84 per cent foresee economic improvement) or China (83 per cent)," it said. But such pessimism is consistent with a consensus view outside India that recent heady economic gains are now a thing of the past, it said. In July, 2012, the International Monetary Fund forecast only 6.1 per cent growth in 2012 for India and a 6.5 per cent expansion in 2013. Both forecasts reflect downgraded expectations just since April, 2012, Pew said. The Indian public is still upbeat about personal finances. Nearly two-thirds (64 per cent) think their own economic situation is good. Despite their increased economic gloom and doubts about their children's prospects, half of Indians say they are better off than they were five years ago, possibly reflecting a one-third increase in gross national income per capita over the same period, the survey results said.

I have become an antique piece

President Pranab Mukherjee joked about his transition from an active political life to the Rashtrapati Bhavan. "....of course, it (being the President) has the other side of the picture that perhaps I have become an antique piece in the theatre of the Indian economic activities...," Mukerjee, who was elected President in July after he resigned as the country's Finance Minister, said at a felicitation programme organised by CII in his honour. Observers wondered whether Mukherjee was alluding to the government move to review his controversial retrospective tax proposals. "I am addressing in a different capacity where I have one advantage and one great disadvantage. Advantage is that I can speak freely in the form of advice but disadvantage is I cannot implement what I speak and what I believe should be done," Mukherjee said. The President also showed shades of his much-appreciated sense of humour when he recalled his last speech in Parliament as the Finance Minister. "... In the last speech in Lok Sabha, I did not contemplate that perhaps it will become the last speech in Lok Sabha because I will be debarred from that premises...," Mukherjee said, amid laughter and applause. Mukherjee also maintained that it is time for the younger generation to take over in politics. "The older generation (in politics)- those who we are- still occupying the space... perhaps some of us should vacate the space for the younger people...," he said.

HYDERABAD REALTY DOWN

New residential project launches in the city declined by nearly 75 per cent to 1,500 units in the first half of 2012 over the year-ago period, according to a report by real estate consultant Cushman & Wakefield (C&W).
"The total number of new residential units launched was approximately 1,500 units in first half of 2012 compared to over 6,000 new project launches during the same period last year in Hyderabad," a C&W research report said.
"The drop in new launches was largely due to the to ambiguity in the governmental policy," it added.
It, however, added Hyderabad is likely to see around 40,000 residential units entering the market in the next three years, of which nearly 60 per cent will cater to the mid-segment category.
"Relaxation in land reservation regulation will positively impact the residential markets with increased new launches in future.
"There are approximately 4,000 units in pre-launch stage in prime and upcoming locations of the city," C&W Executive Managing Director South Asia Sanjay Dutt told reporters here today.
Majority of under construction projects are concentrated in Western and North Western markets.
Western areas of Madhapur, Gachibowli, Tellapur, Kondapur are expected to see 42 per cent (16,800 units) of the estimated supply followed by north-western locations such as Kukatpally, Miyapur, Nizampet which would witness 8,000 units, he said.
C&W expects an increase of 48 per cent over last year in pre-commitments of office space, estimated to be 2 million square feet by the end of this year, which indicates a positive demand trend for the city.
The demand for commercial office space in Hyderabad is expected to increase moderately from next year onwards as economic conditions improve, Dutt said.

EQUITY MF'S VERY WEEK

Majority of equity mutual funds in the country have underperformed against their respective benchmark indices over the last five years, according to a report by S&P Dow Jones Indices and Crisil released today. "The underperformance of actively managed funds in comparison to the benchmarks over the latest five-year period demonstrates once again the difficulty for fund managers to consistently outperform the benchmark," S&P Indices Director Simon Karaban said. A benchmark is a standard against which the performance of mutual fund scheme can be measured. The agency used the S&P Indices Versus Active Funds (SPIVA) scorecard to come to the conclusion. The scorecard reveals a majority of large cap equity funds failed to beat the S&P CNX Nifty, the benchmark for large caps, with 53.33 per cent underperforming their benchmark over the last five years, 57.14 per cent over the last three years and 52.63 per cent over the last year. The percentage of actively managed equity funds underperforming the benchmark indices has seen a declining trend since December 2010. However, their number still exceeds those outperforming the indices, a Crisil statement said. However, data from the diversified funds and equity linked saving schemes (ELSS) suggests percentage of funds outperforming the benchmark in both one-year and three-year period is stable as compared to five-year period, the statement said. Active managers of equity-oriented hybrid funds have also fallen behind benchmarks over both the one-year and five-year time frames, it said. In contrast, the majority of active managers of debt oriented hybrid funds or Monthly Income Plans (MIPs) outperformed the benchmark CRISIL MIP Blended Fund Index over the three and five-year time frames, it added. In the one-year period ended June 2012, the majority of gilt and balanced funds underperformed, while the majority of debt, ELSS and diversified funds beat their benchmarks.

Jiju Vidyadharan, Director for funds and fixed income research at Crisil Research, said the MF industry in the country has been undergoing multiple changes given various regulatory announcements and the rather flat capital markets. "Given the environment, the number of new launches has been low and mutual funds have been in a consolidation phase." "Of the different fund categories, the survivorship has been the lowest when it comes to diversified equity funds across categories and time. Whereas balanced funds, hybrid funds, gilt funds and debt funds had a 100 per cent survivorship in the one-year period," he further said. Continuing the trend observed in the previous editions of SPIVA, the latest scorecard maintains that asset-weighted returns are higher than equal-weighted returns across categories (except for gilt funds) over the five-year time frame. Asset-weighted large cap equity funds have returned 5.86 per cent over the past five years compared to 4.61 per cent for their equal-weighted equivalents. This indicates that funds with better performance over longer time frames had larger assets under management, the report added.

Subbarao cracks a joke

RBI Governor D Subbarao today "announced" the formation of a committee with K C Chakrabarty and Pratip Chaudhuri to look into the issue of Cash Reserve Ratio (CRR) but only to retract shortly later on the "joke".
"Late last night I signed off a paper forming a committee. The terms of reference for the committee are whether we should continue with CRR or not," he said at the annual Ficci-IBA banking conference here.
For a while the audience took the announcement seriously and some journalists "flashed" the news.
The announcement was made in the presence of his deputy Chakrabarty and SBI chief Chaudhuri, who have been engaged in a spat on the issue.
"Members of the committee are Dr Chakabarty and Shri Pratip Chaudhuri. Process of the committee will be that both of them will be locked up in a room until they reach a conclusion and the time frame is that they will not submit their report till my term as Governor is over," Subbarao told the audience that burst into laughter on realising the joke.
After the speech, when asked if he was serious or joking, Subbarao retorted: "What do you think?"