Currently, commercial banks are able to create housing finance assets by lending at least 100 basis points below the minimum rate of most HFCs. According to industry sources, the interest rates for housing finance are at an 18-year low.

However, it is quite likely that the 1998-99 growth rates will be exceeded in the current year, as volume growth will compensate for the tighter spreads. A combination of lower housing finance and property rates will result in a higher demand for housing. Already, there have been news reports that in the aftermath of the last Union budget there has been a steep increase in demand for housingfinance. The full impact of this increase in demand for housing finance will be felt in the current financial year.

The LICHF stock, which did not really participate in the stock market rally, had begun to look up around the time of the announcement of the results. The market did respond to both the growth in net earnings as well as the improvement in spreads in the last quarter. But more than the current performance, sector analysts are betting on the fact that the current year's performance will be far better. Both HDFC and LICHF reported a 25 per cent growth in loan approvals in 1998-99. Disbursals too were in a similar range for both these companies.

Sterlite Industries

Despite good fundamentals and a participation in the rally, the run for Sterlite seems to be over, for the moment at least. There are a couple of reasons for this development. One, Sterlite will be transferred into the list of stocks that will be compulsorily traded in the paperless form from June 1. However, the last date fordelivery for this purpose is April 23. Going by the experience of other stocks just prior to being traded in the paperless form, it is very likely that traders, particularly those holding the stock in street names, will choose to offload it on the market before that date. Second, during the rally there has been a huge build-up of outstanding long positions while there are very few short-sellers. It is quite likely that the outstanding buys will be liquidated over the next few days, leading to a correction in the stock.

To some extent the correction in the stock has already begun with Sterlite losing ground from its Thursday high of Rs 207.

Further, the stock did not participate in Friday's rally either, citing evidence for the impending weakness in the stock in the coming week. But apart from this short-term aberration, there is little that could be classified as fundamentally negative for Sterlite's stock. The company's copper smelter, which has been a major contributor to the negative sentimentsurrounding the stock, has been running at 90 per cent capacity utilisation in the last quarter (ending June 1999).

Besides, the company will be a major beneficiary from the 1999-2000 DoT tender for jelly-filled cables. Sterlite expects to capture 20 per cent of the tender which is totally worth Rs 3,300 crore. For the nine-month period there was a minor dip in profits owing to an increase in fixed expenses, as a result of the commissioning of the copper smelter.