INDIAN MARKET

Indian Markets…Where do we go from here………?
· Indian markets moving on sentiments due to SUB PRIME crisis.
· Good news of Crude prices is ignored in India. Crude prices has
come down to 79 $ from high of 130 $, due to lesser demand in
US. Every 10-15 fall of $ in crude saved a 10 billion $ bill for
India which translates to 1 % of GDP. The total benefit from this
fall translates to 3 to 4 % of GDP. Higher Crude bill means high
interest rates , high current account deficit and high fiscal deficit.
We will overcome this problem, but it will take few quarters for
this to be reflected.
· Steel, oil and rubber prices have come down, and many
commodities prices are coming down.
· IMF has projected 7 % inflation rate for India in one year’s time.
· Current Sensex levels leave scope for great earnins since they
are quoting at 13-14 PE ratios. Valuations are extremely
attractive.
· It would have been better if CRR cut had come earlier. Rs 60000
crs of liquidity will be of great help to market, where credit is of
great importance. It is the lifeline of business.
· Panic not seen in the past, and valuations have rarely gone
below 9 to 10 % PE in the past.At 14000 levels we were
estimating 25 % profits for 2 years investments, at these levels
the returns will be much more and faster. This is twice in the life
kind of opportunity. Risk perceived is high, nobody knows the
bottom, but it is close to the bottom PE levels. Any investment
today will give deep and solid profits.
· India is not greatly effected by SUBPRIME crisis. Exports to GDP
is lowest in the world. Exports to US are 25 % of our exports or
3 to 4 % of GDP. US economy is not shutting down. Our 4 %
GDP may not grow by 4 % since Rs 100 in US may either
become 101 or may become Rs 98.00. 4 or 5 % of GDP of the
economy does not grow, impact will not be felt If our growth
rate was 8 % it will be 7.5 % now. Dependance upon exports is
the lowest. US is struggling to grow at 1 or 2 %. We will grow at
the rate of atleast & %.
· Investments of Indians or Banks outside India are not
vulnerable, but investments by banks outside will be in single
digit. We are not deeply impacted.
· Capital inflows are very small. FDI is 1 % of our GDP. We have
always been criticized for low FDI inflows, which is a blessing in
disguise today. 90 to 95 % of our capital expenditure is met
through local savings. Our dependence on foreign capital is not
much. Indian economy will be least effected in the world than US
or Europe.
· FIIs are secondary players. Damage has been done. Whenever
FIIs leave our country, it is time to invest.
· It may take months or a few quarters when people become
buyers again in our markets