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Buoyant Indian Financial Markets Essay

1073 words - 5 pages

Buoyant Indian Financial Markets

Despite vanishing FIIs, the Indian markets remain resilient and staying afloat .The US crisis has significantly affected the investor’s sentiments. There will be substantial capital out flows owing to investor’s tendency to with-draw from risky markets. This would lead to liquidity crunch that will, in turn, put pressure on the Indian bourse.

Currently the Indian economy is reeling under high inflation and a moderate growth rate. The Indian economy continues to show good health because of the strength of its domestic drivers, like infrastructure projects, SME sector exports and good yielding from agriculture sector. India is now in a position to ...view middle of the document...

65 percent, and IT index closed 5.5 down on the same day.

The cause behind US economy debacle is, the US investment banks are extremely over-leveraged and solely dependent on whole sale finances. This led to their demise. But such is not the case with Indian Banks. The common man’s deposits are more in India and they have the trust on the Banks, because all most all the Banks are nationalized and the depositor’s interest is highly protected by Government of India.

But where as in US the investment Banks are dependent on institutional investor’s funds. These investments are highly volatile and always search for high returns on their deposits and their way of depositing is Demand based and not Time based. That means when ever they feel the return on their investments are dipping with in no time, with draw funds from such markets and re-invest in Better markets or take defensive positions, until the markets regains its strength.

The Lehman brother’s debacle was raised from “SUBPRIME” episode at US. The sub prime caused great loss to US economy in the previous year and the bad effects of SUBPRIME showed their impact now on the Investment baking in US.

The US Government knows it before hand and predicted the collapse of markets in near future by SUBPRIME. The US senate had a plan of buy-outs &Bail-outs in the time of crises to stabilize the US economy. The stunt, in the US senate about Bailout of the Lehman Brothers and other institutional investing Banks was already rehearsed and well played on the stage.

All the investors through out the world viewed this spectacular thriller with hair rising. The US senate under the leader ship of George Bush put an end to the financial crisis since the great depression of 1929.

Predictably, India like any other country is experiencing the repercussions of financial mess in the world largest economy. The Reserve Bank of Indian came with a package of Rs.20, 000 crore to Bailout Indian financial institutions and strengthen the stock market sentiments.

All the Domestic markets around the world will remain under pressure till the details of the $800 billion Bail out program announced by the US government come out. The bank...

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