End of week 41 the inauspicious Pitra Paksha passes away giving way to newfound aspirations of turn of fortune. Indian long product steel market has been sulking for over 6 months under the burden of slowing economy and infrastructure activity. Policy paralysis in the government was primarily responsible for the impasse in demand generating activity. As new projects remained embroiled in hiatus, credit squeeze owing to high lending rates made the misery intense.
Reality sector has always been at the vanguard of rally in property prices and consequent impact on steel prices. However credit squeeze and Non- Performing Assets have sapped it of transactions.
As yet all is not lost with the government suddenly emerging from slumber went in overdrive after shedding political handicaps to save nearly junk economy. Slew of investor friendly measures to attract FDI in retail, insurance and Air lines have dusted off the morass. FDI in retail has despite rising shrills from political conservatives portends to be multifaceted boon from agriculture to construction industry apart from pampering the consumers. Even though it might be drop in nearly USD 1 trillion infrastructure investment in 12th Five Year Plan is step towards the shining horizon.
FDI in retail will have bearing on the real estate industry in the sense that demand for property is a derived demand. In the short term it is driven by the sentiment in the economy and in the long term it is demand for more space culminating in demand for steel, cement etc. Maintenance on unbroken supply chain being pivotal for the retail in multi brand products development of warehousing and logistics becomes imperative. Accordingly in a nation afflicted with chronic logistical and storage problems in agriculture sector the scope of activity becomes immense.
Retail outlets have gestation period of 18 months. Inherent sense of urgency in constructing outlets will certainly catapult the reality sector in higher orbit sooner rather than later. Ensuing demand for steel will warm the frigid market in steel. Even though there will be a gap of 3 weeks before the real action starts after the Chaath festival but the movements are unidirectional for improved off take and margins.
Punctuated by appreciating INR and depressed international price the threat of import has re-surfaced recently but it will be primarily a domestic match with producers slugging out enhanced demand.
Source - Strategic Research Institute
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