FINANCIAL MARKET INDIA

When the equity market across the globe was in bull phase in the last year, we saw a lot of market experts appearing in the News Channels and print media giving tips for becoming rich overnight. This phenomenon was not only observed in India, but it was seen elsewhere. Wealth Management, Private Banking, Cross selling by the Banks for investment in Mutual Funds were the buzz word. The glamour and hype of the market was such that any TOM, DICK and HARRY from a third class B-School was selected for Investment Banking by the private investment consultants, brokerages and even so called very smart Banks for the wealth management and private Banking. Where have gone all the experts? Where are technical experts and Stock Analyst? Who is responsible for erosion of wealth for the investors? Who will take responsibility for failure of Banks particularly in USA and Europe? Why 150 year old institutions are failing? Why there is loss of confidence in the financial system? I know, nobody will co...

In its Mid-Term Review of the Annual Policy Statement for 2008-09, the Reserve Bank of India indicated that in the context of the uncertain and unsettled global situation and its indirect impact on our domestic economy and our financial markets, it would closely and continuously monitor the situation and respond swiftly and effectively to developments. In doing so, the Reserve Bank will employ both conventional and unconventional measures. Global financial conditions continue to remain uncertain and unsettled, and early signs of a global recession are becoming evident. These developments are being reflected in sharp declines in stock markets across the world and heightened volatility in currency movements. International money markets are yet to regain calm and confidence and return to normal functioning. It was also indicated in the Mid-Term Review that the current challenge for the conduct of monetary policy is to strike an optimal balance between preserving financial stability, maint...

The effect of global financial crisis is felt by the mutual funds in India rather than the Banking System. Even the debt oriented mutual funds, which are generally considered safe as compared to the equity oriented mutual funds are giving negative returns, which really tells the quality of the fund managers in those mutual funds. Generally, investors with less risk apetite prefer debt oriented mutual funds which invest in Central Government Securities, State Developments Loans, Treasury Bills (Sovereign Debt) and other short term debt instruments like Certficate of deposits (issued by Banks), Commercial Papers (issued by Corporates) and Non SLR Bonds. These investments give a steady income flow to the investors with low risk. The secondary market for SLR securities is quite liquid and valuations are more or less transparent. But in case of CD/CP/ Corporate Debt, the secondary market is not very active and there are very wide fluctuations in their pricing. Therefore, in case of huge red...

As equity markets across the globe are melting down as fast as glaciers due to global warming, both the fundamental analysts and the high profile technical analysts have disappeared from the market. Thank God! we are not hearing any expert advice in CNBC on the investments and SENSEX reaching 25 K or 30K. Valuation experts are clueless and the people who were recommending buying at 20000 levels are not seen anymore. In these type of situation, people should realise that it is only GREED and FEAR among human beings that is running the market sentiment. Fearfull people sell on fears of prices going down and Greedy people buy on greed of making money on the same stock. The seasoned investors like Buffet is the firm believer in the behavioral aspect of the markets. Yesterday, in a column published in the New York Times, he said that "...I've been buying American stocks. This is my personal account I'm talking about, in which I previously owned nothing but United States govern...

Indian rupee has seen depreciation in the last 3 months at a rate that has confused most of the market players and analysts. If we think rationally, looking to the deep financial crisis in the USA, the value of USD should depreciate against the currencies of the countries with sound financial systems that are less impacted by the global turmoil. But ironically, INR has depreciated by more than 23 per cent in the last 9 months. There may be many reasons for the depreciation in the Indian Rupee, but if we analyze the movement of SENSEX vis a vis INR, we found some pattern in the movement. The SENSEX touched a record high of 20873.33 on 8th January 2008 and INR touched a record low of 39.2650 on 15th January 2008. It is quite evident that the sentiment in the Indian Equity market became very bullish after the FII funds inflows were very strong and SENSEX rose from a level of 4500 in early 2004 to 20800 in January 2008 (Less than 4 years). But due to the current Financial Market Crisis, th...

In the present global credit crisis and stock market crashes across the globe, let us see the worst stock market crash over the last century. These are as follows: 1 ) Wall Street 1929-32 -89% The Wall Street Crash heads the list, with the US stock market falling by 89 per cent between 1929 and 1932. The burst of the speculative bubble led to further selling as people who had borrowed money to buy shares had to cash them in a hurry when their loans [were] called in. 2 ) US NASDAQ 2000-2002 -82% The second biggest collapse came from the technology-rich US Nasdaq index, which fell by 82 per cent following the bursting of the dot com bubble in 2000. 3 ) Japan NIKKEI 1990-2003 -79% In third place, with a 79 per cent decline, was the Japanese stock market, which suffered a protracted slide in price from 1990 to 2003 as a share and property price bubble burst and turned into a deflationary nightmare. 4 ) London 1973-74 -73% Next came the UK stock market’s 73 per cent drop in 1973 and 1974....

THE FINANCIAL CRISIS: As the US lawmakers and the FED are busy in making strategy for the bail out from the severe financial mess and the worst crisis since the great depression of 1930’s, let us try to diagnose the genesis of the crisis that has triggered worldwide financial instability: There may be many economic and fundamental reasons behind the current crisis. But the seeds of the problem were sown in the aftermath of 9/11 attacks, when Greenspan lowered the interest rates in order to fight the slowing growth. But, low interest rates coupled with government populist policies that generated demand for housing and other consumer loans. When demand rose, the housing prices soared to a record high and at a speed that was totally absurd. At the same time, default spreads in the bond market also diminished to the historical lows. In the second stage, these housing mortgages, were bundled into mortgage backed securities and were traded thereby shifting more and more risk on the last hold...