INTERNATIONAL CRISIS – FALLING CAPITAL MARKET – AN OPPORTUNITY FOR INVESTORS

The US sub-prime crisis has caused significant losses to international financial giants including Citi Bank, Merrill Lynch, Goldman Sachs, ABN Amro, Royal Bank of Scotland, UBS, Societe Generale and many more. The major US financial giants have already written off more than 100 billion dollar towards losses on sub-prime advances and their derivatives. The property prices in US have reduced by more than 50%, a large number of listed companies are quoting below their book value, jobs are being lost and threat of recession is looming large. The Federal Bank of US has already reduced the interest rates by about 50% in last few months with a view to arrest the recessionary tendency. The losses have primarily arisen on account of advances in real estate sector wherein due to defaults by the borrowers, properties were sold by banks resulting into further downfall of the market and further defaults aggravating to a huge loss situation. The Indian Capital Market has been severely impacted by the crisis in the US market and the sen sex has already come down from 23000 – 24000 mark to about 15000 – 17000 range. The sentiment in the Indian Capital Market is highly subdued. The
technical analysts are projecting a further downfall on the basis of arithmetical and statistical formulations. The market analysts are pronouncing the apprehension of a big fall further. The Indian economy on the other hand is very strong with an 8.8% growth in 2007-08. Most of the businesses are doing well and are expanding. The Indian businesses or financial markets are not having any major or noticeable impact of the international crisis, in view of lower dependence of the Indian
market on the international businesses. The economy is in a resilient mood and is ripe for a further substantial growth arising out of large government, PSU and private sector investments. The slowing down of the economy as is seen may be viewed as part of the monetary policy of the central banker wanting to wrest the fledgling and over heated economy. The path to the growth in economy should be steady and firm. The Indian Capital Market is likely to revive substantially in the near future
in my be one or two months and this temporary apprehension of the impact of US crisis on the Indian
market is likely to fade away as per fundamental indicators clearly laid out by the Economic Survey 2008 issued by the Government. Even US market is likely to revive in a period of 3 to 6 months, significantly, in view of substantial reduction in Federal interest rate providing support to buoyancy in the US market and reducing risk of sub-prime advances default. Is it the right time to buy or to wait for the bottom is a crucial question being raised? The market has already come down to a very low level and may rebound at any time. Now it is for the investors to take a view, the down side risk being significantly low.