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In February, Marc Faber in an interview with CNBC-TV18 predicted that the Indian market (BSE) was on a bubble and that it would fall to 14000 – 12000 (the market was around 18000 then).  What a fall it has been since.  We have already touched 8000, though the markets have slowly inched upto 9500, we are still not out of the woods.  With the US and other major economies into a recession, we are indeed looking at some tough months ahead.

I had made light of Marc Faber’s predictions then.  Now i have ended up with my foot in the mouth

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4 years ago when the Manmohan Singh led UPA government came to power at the centre, there was widespread optimism that his government will unleash a second round of liberalisation of the economy.  4 years later, the clamour for divesting the government’s stake in Public Sector Units (PSU) is only increasing.  Now that the monkey (commies) is off the back, the UPA government is trying to make up for lost time by trying to reduce its stake in a few PSUs.

Contrast this with the situation in the US, the bastion of free markets of the world.  One by one the icons of Wall Street are being nationalised in rapid succession.  First it was the rescue of Fannie Mae and Freddie Mac.  Now, its AIG. Initially the US government refused to step in.  Now, its out of compulsion that its buying out the free falling companies.  Letting them crash to the ground and bankrupt would mean a sure shot meltdown of the US economy.

Just 6 months ago, who would have thought that financial powerhouses like Lehman Brothers would collapse and Merrill Lynch be gobbled up by Bank of America ?  Earlier, the Federal government helped JP Morgan buy up the ailing financial powerhouse Bear Stearns.  Now the only 2 major investment banks that are left are Morgan Stanley and Goldman Sachs.  Already indications abound that Morgan Stanley is the next in line for a collapse. Though economists are secretly happy to see the collapse of these investment banks as they are the prime reason for the subprime bubble in the first place.  Just 10 months ago, Goldman Sachs was in the news for doling out billions of dollars as performance bonus for its employees. How ironical.

These are the bigger ones to fall.  There are lots of smaller banks, financial institutions across the US of A which are either closing down or they might be soon gobbled up by the few surviving institutions. According to this report, almost 100 banks in the US might close down by July 2009.  Can there be a more frightening thought?

Only time will tell how much this financial tsunami is going to affect the world market. Btw, did anyone say that we are already decoupled from the US economy?  Even iam guilty of believing that the two alternate markets (China and India) would soak up some of the pressures built by the sliding US economy.  How naive was i.  It would take years if not decades for the rest of the world to even hold a candle to the US economy.

So, when the ride is rough, the only intention should be to try to keep the head above water.  There are lots of companies on the Bombay Stock Exchange available for cheap.  Companies that are still growing at 10-20% per annum and with lots of cash to spare.  Many companies, available at their cheapest prices ever.

If only i had some spare cash to buy now

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India is fast catching up with China in the flow of foreign direct investment (FDI) as capital inflows through this route has crossed $10 billion in the first quarter of this fiscal. FDI in the first quarter of the financial year 2009 has far exceeded the total FDI flows received by the domestic economy in 2005-06, Reserve Bank of India’s data said.

The total FDI inflows into the country in the April-June period amounted to $10.073 billion, nearly one billion more than the total FDI inflows–$8.961 billion– in the 2005-06 period, RBI said in its August report.

The FDI flow into India was less than $10 billion annually until 2005-06. It shot up to $22 billion in 2006-07 and $32 billion in 2007-08. China has averaged $ 50 billion annually in the past decade. If the first quarter trend continues, India could cross this fiscal $40 billion mark in FDI annual inflow for the first time. FDI flows, during April-June, has doubled when compared to the same quarter of financial year 2008, $5 billion.

Full article here.

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The economy grew an impressive 9.6% in 2006-07, the highest in the past 18 years. Releasing the revised estimates here on Thursday, finance minister P Chidambaram said the government was confident of achieving “a close-to-9%” growth rate in the current fiscal. This translates into an almost Rs 1,700 rise in every Indian’s annual income. Per capita income, or the income each citizen would receive if national income were equally distributed, grew at 8.1% to Rs 22,553 in 2006-07, from Rs 20,858, in 2005-06.

Chidambaram said despite growing uncertainty and turbulence in global Markets, the Indian Economy was estimated to grow at near-9% in 2007-08, although the government may need to make ‘rapid adjustments’ in policy, depending upon the global situation. “Which side of 9% it is difficult to say,” the minister told reporters. He added that he would be doubly happy if it was to the right side of 9%.

The government’s Central Statistical Organisation (CSO) had earlier estimated growth in gross domestic product (GDP)—a measure of overall domestic income—at 9.4% for 2006-07. The upward revision comes as a result of higher growth in the banking & insurance sector at 13.9%, instead of the estimated 10.6%.

CSO has also revised the growth estimate for 2005-06 to 9.4% from 9%. The revised data puts the Economy’s average growth rate over the past four years since the UPA government has been in power at 8.8%.

“This shows that since the United Progressive Alliance came to power, there has been an investment boom. People are investing and they have confidence in the future,” Chidambaram said. “Domestic investment has been high and foreign direct investment also played its part.”

Sector-wise, while growth in manufacturing has slightly eased, construction has improved to 12% from 10.7%.

Above news courtesy: Financial Express

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Merrill Lynch, UBS and now Citigroup. Years of lending money without the necessary precaution has lead to this day. The American economy is already in recession though no one wants to spell it out. Will it drag the world economy down or will the Asian dragon (China), Elephant (India) and the tigers (Korea, SE Asia) help to cushion the impact? Well, its going to be a defining year for the world economy for sure.

Citigroup, the nation’s largest bank, reported a staggering fourth-quarter loss of $9.83 billion on Tuesday and issued a sobering forecast that the housing market and the broader economy still had not bottomed out.

To shore up their financial condition, Citigroup and Merrill Lynch, which has also been rocked by the subprime mortgage debacle, both were forced again to go hat in hand for cash infusions from investors in the United States, Asia and the Middle East, for a combined total of nearly $19.1 billion.

Citigroup’s record loss was caused by write-downs from soured mortgage-related securities and reserves for current and future bad loans totaling $23.2 billion. Responding to a string of dismal quarters, the bank said it would also lay off another 4,000 workers, on top of announced reductions of 17,000 employees, and cut its dividend to conserve $4.4 billion cash annually.

Full article here.

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