FINANCIAL MARKET INDIA

The timing of recent proposal by RBI to introduce base rate mechanism for lending activities could not have been better. Taking the experience of global financial crisis in which Indian Banks remained more or less unscathed, there must be a transparency in systems followed by the Banks to lend money prudently. Banking is a business, where safety of depositors money is of utmost importance. By lending below the average cost of the Bank, the bank jeopardise the safety of depositors fund as well as start a rate war among the lending institutions, that may be beneficial for the Bank as well as immensely beneficial for the borrower in the short term, it may be harmful for the banking system as a whole. The basic question is why should banks lend money at less than the cost of the fund to the bank? If strategically lending is done to select customers at rates below cost of funds, this has to be cross subsidised by higher rates for many more borrowers. There starts a disparity among borrowers

Beware. Once again experts are prowling for their prey. People are being given tips to make easy money. FII flows are coming to the equity market and market is zooming targetting new highs as if there was no problem last year. Sensex crossed 17000 and new targets were set on business news channels luring people to again invest in the stocks. Mutual fund sales pitch increased and new schemes are being launched. But does the situation is so goody- goody? In my personal opinion, again this is exuberance and experts are betting on greater fool theory.The greater fool theory (sometimes the bigger fool theory, also called survivor investing) is the belief held by one who makes a questionable investment, with the assumption that they will be able to sell it later to "a bigger fool"; in other words, buying something not because you believe that it is worth the price, but rather because you believe that you will be able to sell it to someone else for an even better price. Today most o

USA IS NOW USSA UNITED SOCIALIST STATE OF AMERICA Do you still feel that USA is a free market economy where government’s work is only governance? When USSR failed in the late 80’s, the western media was quick to point out that it is the end of Socialist character of the State. These experts pointed out that Capitalism is the best way for nations to prosper. Now it is only almost 20 years from that timeline and US free market economy is in shambles. The champions of Capitalism are hiding their faces and it is only the government that has come to the rescue of failing companies. The biggest insurance company has already been nationalized (but they call it bailout). If the government does not nationalize its big banks, the US economy may go to its historical lows. In the name of free market economy the private institutions treated the public money as their own private money (not for public benefit as a trustee of that money). The government official and also the regulators utilized their

The present US Financial crisis was bound to happen. Only time will tell whether we have learnt something from it or not. Today, US president Obama blasted CEO’s who are still trying to get bonuses in this crisis time. I think (may be wrong) that the present system of bonuses for making short term profits is one of the major reason for so much greed in the executives across the globe. What we have observed that people get bonuses for their annual performance and then move on. The company is normally not able to assess the long term impact of the short term performance of its employees. It is high time that HR professionals look into the whole compensation process with a holistic attitude that can be beneficial for the organization in the long term. CEO’s and executives of large companies took their bonuses (some by cheating……Madoff.) and they are the people who are responsible for the current crisis. In the War situation also many people lose their job, companies shut down, economies d

Last 6 months in the market is so turbulent that I had to unlearn whatever i have learnt from ny experince as an investment management professional as well as a student in the B-School. All the theories about risk free securities, equity risk premium, efficient market hypothesis, risk management systems have not worked in these turbulent times. Even the regulators are totally confused. Only in the second quarter of 2008-09, inflation was considered to be serious threat to the economy and crude oil pricees were soaring high and expert analysts were talking about crude going to USD 200. In a bid to save the Indian economy, RBI decided to solve the problem through monetary tigtening as the textbooks on economy suggests. Banks were worried about their profit margin due to treasury losses. I as a trader in bond market was also making losses on my trading positions. But came September 2008, that will be remembered by all the people who are not even directly interested in Financial markets.In

The global financial situation continues to be uncertain. Since the official recognition of recession in the US, the UK, the Euro area and Japan, the downside risks to the global economy have increased. Concomitantly, the policy initiatives in the advanced economies are geared towards managing the recession and defusing potentially deflationary trends. The US has reduced the Federal Funds Rate to 0 - 0.25 per cent. Several other advanced and emerging economies such as Japan, Canada, Republic of Korea, Hong Kong and China too have reduced their policy rates. 2. India’s financial sector has remained resilient even in the face of global financial turmoil that is so deep and pervasive. Our financial markets continue to function in an orderly manner. India’s growth trajectory has, however, been impacted both by the financial crisis and the follow-on global economic downturn. This impact has turned out to be deeper and wider than earlier anticipated. Concurrently, because of global devel