The Hindu Business Line : Housing finance cos feel the inflation heat

Mumbai, June 27 Along with banking, auto and realty stocks, the shares of housing finance companies also took a beating on Friday as inflation stood at a 13-year high for the week ended June 13, 2008 at 11.42 per cent. Fears of further monetary tightening by the Reserve Bank of India to curb inflation have led to heavy selling of these stocks, said analysts.

“Just three days back the central bank hiked both the CRR and the repo rates, people expect further tightening. This will now force the banks to raise the interest rates as well as deposit rates,” said an analyst at a brokerage.

Already a few banks including SBI have hiked interest rates for housing loans. A further hike in interest rate could put pressure on the offtake, say analysts.

Housing Development Finance Company was among the worse performers in Sensex stocks on Friday. The share price of HDFC plummeted 8.15 per cent, or Rs182.15, from its previous close at Rs 2,052.70. A total of 2,90,640 shares were traded on the BSE.

“HDFC is highly co-related with the movement of the Sensex. When the benchmark surges, so does this stock and when the benchmark dips, the stock also sees a lot of selling. So when the market tanks brokers generally advise their clients to sell these sort of stocks”, said Mr Alex Mathew, Head Research at Geojit Financial Services.

LIC Housing Finance shed 6.34 per cent, or Rs 18.50, to Rs 273.90 from its previous close. A total of 99,671 shares of the scrip were traded on the BSE on Friday.

Among other housing finance stocks that took a beating were Dewan Housing Finance Corporation, which fell 2.65 per cent to Rs 90.15 and GIC Housing Finance, which dropped 1.67 per cent to Rs 58.75.

“The credit off takes of these housing finance companies has been affected as profits of real estate companies have taken a beating due to rising interest rates. The disbursement levels have also decreased as the key interest rates have been hiked by the RBI. These companies have also increased their Prime Lending Rates (PLR) which has again negatively affected their profits”, explained Mr Sanjay Someshwar of Ventura Securities.

Another reason say analysts is that in America investors are being advised to exit their positions in financial services and automobile sector stocks due to profit uncertainty.

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