They say fall of Wall Street giants will not have a bigger impact on Indian markets.

IIPM - Admission Procedure

They say fall of Wall Street giants will not have a bigger impact on Indian markets. But with a sectorial review things may sound different, says Sunanda Roy

A humorous Internet one liner says, “Evening news is where they begin with ‘Good evening’, and then proceed to tell you why it isn’t”. Well, see any edition of any business news these days and you would get to know how true it is. Moreover, down on its knees the global financial market is providing them more than enough events to further validate the hypothesis mentioned above. Back home in India the domestic stock market too is leaving no stones unturned to help the news channels. But then, blame the modern era of highly integrated financial markets for this, which have ensured a negative impact of the US turmoil on the Indian stock market. Fall of the Wall Street giants, Lehman Brothers, Merrill Lynch and AIG – as if they are exemplifying what the ‘Domino effect’ is all about – quashed whatever little confidence investors were left with after the mayhem that they witnessed earlier this year. But the million dollar question is, did it actually impact India enough to draw a prolonged red line on the Dalal Street? Perhaps, that’s the priceless answer all investors are looking for at the moment.

So far, the overall reaction is quite soft – nobody has predicted any long term harassment on the Indian capital markets. Going by the words of Sandeep Nayak, Senior VP & Head – PCG dealing, Kotak Securities, “The Indian stock market will suffer from the contagion effect of the global crisis and move in tandem with the American markets for the short term.”

But then, how can one forget that the Indian stock market is still a slave to Foreign Institutional Investors (FIIs). They have always reacted to FII movements, be it when they have pumped in money or when they have sucked out. And currently, the global financial crisis has made them take a flight back from risky emerging assets (equities and commodities) to safe havens like the US treasuries and bullions. Pankaj Pandey, Head of Equity Research, ICICIdirect.com avers, “As Indian markets are too FII sensitive, this pullout, as already seen, will continue to suck out liquidity from the Indian stock markets. This year itself, FIIs have pulled out close to $8 billion from the equity markets and since then the Sensex has corrected by 30%. Hence, one can asses the impact of FII liquidly in the markets.” FII pull out will not only keep the downward pressure intact on the bourses, it will also keep them volatile. Chances of volatility being persistent also increases manifold owing to relatively low volumes, bad market depth and breadth and distress selling by retail investors. It’s simply for the fact that absence of foreign money will see the market trade range bound along with some nibbling done by the domestic insurance and asset management companies.

For more articles, Click on IIPM Article.

Source : IIPM Editorial, 2008

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles.
IIPM Programme :- SUPERIOR COURSE CONTENTS
Now IIPM's World-Class Education... for everybody!!
IIPM INTERNATIONAL - NEW DELHI, GURGAON & NOIDA
IIPM, GURGAON
IIPM : EXECUTIVE EDUCATION
IIPM’s 36th Glorious Year of Academic Excellence
4Ps Power Brand Awards 2007
When IIPM comes to education, never compromise
Why Study Abroad When IIPM Gives You 3 global Advantages!
IIPM Ranked No. 1 B-School In Global Exposre - Zee...