Indian Economy: News and Discussion (June 8 2008)

Paul · Post by **Paul** » 15 Sep 2008 12:21

What does this baloney have to do with the Indian Economy....?

vina · Post by **vina** » 15 Sep 2008 12:55

What does this have to do with India ? . Obviously you havent looked at the Indian stocks today!

vina · Post by **vina** » 15 Sep 2008 13:02

Seriously , what I think it means for India is this. There are sectors, many of them that were in a supeculative hyper frenzy. Real estate being high on the list and stock prices and folks like India bulls and all the rest right behind . I think that has burst big time.

The real estate guys IPOed at right time (atleast the big ones) and the others were tapping in to private equity money in India. Both are dead now. .. Oh.. dont even get me started on stocks like India Bulls.. (Merrill Lynch , whose symbol is the big bull, and the statue of which at the entrance of Wall st , near Fulton st , a block away from the Staten Island ferry just got skewered.. Punch lines from Merrill.. We are Bullish on America!.. If big bull is skewered, what of India Bull , I wonder). What this will mean is that real estate will absolutely have to deflate. That is dicey.. If property values fall 20% or so, what happens to the loans of all the banks that lent like there was no tomorrow between 2000 and 2007 ?. Wonder what default rates are going to look like.

"Presidential villas" at 3.5cr aye ? and where ?.. Rs 5000 a sq ft and where did you say it is ? .. Food for thought. Oh one more point. Dollah crashes, inflation goes up!..

satya · Post by **satya** » 15 Sep 2008 13:50

Paulson was btw rock n hard place , damned if he bailed out , damned if he didnt but chosing not to help out , its a big big risk cuz there's no risk model with such levels of volatility in global markets to know where we go next ,its worse than a chain rxn . One thing for sure , day-traders will have a rags to richs and riches to rags ride .

For India, Panda next door in limbo whom to save US or self

. IMHO , gold should hold at min. if not go above 800 at min. . Crude down , down and down well below 90$ at min. so maybe a small silver lining for India .

JMTs .

AshokS · Post by **AshokS** » 15 Sep 2008 15:37

The impact to India is that PE funds that have invested in India over the past few years did so since Indian sectors like real estate were thought to be a good investment as they bet their exit strategy on multiples expansion. This was especially attractive as the US was getting overpriced or slowing down, India seemed like a good place to invest. With the slowdown in India in these sectors their exit strategy is not happening. the investments that will make some coin in the future are the more difficult "roll up the sleeves" type - where there are real operational improvements in the purchased asset to create value (they use the increased cash flows to increase their equity positions). Thats a lot harder than just riding out a booming stock market or real estate market and then selling at high multiples, so I think there will be less institutional investment over the course of the next two years as PE / Sovereign money look to buy cheaper distressed assets in the US over relatively overvalued Indian assets. That will slow things down considerably in India, people who bought over the last 2 to 3 years may be in a rude shock when they try to sell their homes....

bart · Post by **bart** » 15 Sep 2008 16:38

Dumb question from guy who knows little about markets or finance:

With AIG etc on the brink of collapse, what does that mean for Indian insurance customers who have bought policies or investment schemes from the Indian JVs such as Max NY Life, Tata AIG etc? Is there any serious risk of them losing their money or does the government regulations provide sufficient insulation from parent company woes or a safety net for Indian customers?

vina · Post by **vina** » 15 Sep 2008 17:20

bart wrote:Dumb question from guy who knows little about markets or finance:

With AIG etc on the brink of collapse, what does that mean for Indian insurance customers who have bought policies or investment schemes from the Indian JVs such as Max NY Life, Tata AIG etc? Is there any serious risk of them losing their money or does the government regulations provide sufficient insulation from parent company woes or a safety net for Indian customers?

They should be perfectly safe. The JVs are separate legal entities in themselves. They will be in trouble only if their investments are in trouble or if they loaned money to AIG, invested in AIG shares etc and are facing a default . What will happen is that if AIG declares bankruptcy, the creditors can auction off AIG's share in the JV (49% or whatever it is) and the JV will have a new set of owners.. Tata and whoever ends up buying AIG's share. Life goes on as usual.

vina · Post by **vina** » 15 Sep 2008 17:32

AshokS wrote:The impact to India is that PE funds that have invested in India over the past few years did so since Indian sectors like real estate were thought to be a good investment as they bet their exit strategy on multiples expansion. This was especially attractive as the US was getting overpriced or slowing down, India seemed like a good place to invest. With the slowdown in India in these sectors their exit strategy is not happening. the investments that will make some coin in the future are the more difficult "roll up the sleeves" type - where there are real operational improvements in the purchased asset to create value (they use the increased cash flows to increase their equity positions).

Couldn't agree more with you. The PE bubble has really been pricked. There anyway was too much PE money chasing too few quality deals in India. Mind you, nearly every PE deal in India is "growth capital" investing, none of the traditional stuff like LBO/MBO and distressed situation investing or even something like hostile takeover. PE game in india is /was a one trick pony.

Thats a lot harder than just riding out a booming stock market or real estate market and then selling at high multiples, so I think there will be less institutional investment over the course of the next two years as PE / Sovereign money look to buy cheaper distressed assets in the US over relatively overvalued Indian assets. That will slow things down considerably in India, people who bought over the last 2 to 3 years may be in a rude shock when they try to sell their homes....

Yup. The real estate scene in India will be dead as nails for the next couple of years atleast ( I would think 3 to 5). It is back to the 1995 to 2000 scene, when real estate prices in real terms stagnated after the boom earlier. What we are seeing now is a classic boom -bust cycle in real estate . That has to absolutely deflate. Folks who bought in the past 3 years are going to see negative real returns for the next 5 years or so and for highly leveraged buyers increasing distress and negative equity even.

I think the stock markets are overvalued in many sectors on a fundamental basis as well. The slowdown is real and palpable , liquidity is decreasing and we will see higher risks getting priced into the markets when the bubble bursts in RE and other sectors start reflecting in the balance sheets of the financial sector.

All in all.. hold your horses boys. Sick to cash and near cash.. I had mentioned 6 months ago , that for the next 1 year on a risk adjusted basis the Fixed Deposit, which gave around 9 to 10% was the best bet. I still stick with that. Nothing else will give you that kind of safe return.

Just a word of advice.. Run to the good "safe" PSU bank (IOB, Canara etc ) and put your money. Stay away from ICICI etc. ICICI are a bunch of gun slinging cowboys .Diversify your money and dont put all in one place. SBI the govt will guarantee it, so they should be okay as well,despite the exposure to real estate and other doubtful stuff like 2 wheeler and personal loans.

Time to be extremely risk averse.

satya · Post by **satya** » 15 Sep 2008 17:32

There will be a fresh supply of newly minted Uncle Sam's paper for Asian markets specially India .Hopefully ,it may go into real infrastructure projects than in 10 crore Penthouse in G'gaon type real estate projects.If GoI plays its cards well , India can come out as the shining knight with gud fundamental basis giving consistant returns .

Rishirishi · Post by **Rishirishi** » 15 Sep 2008 17:50

vina wrote:
AshokS wrote:The impact to India is that PE funds that have invested in India over the past few years did so since Indian sectors like real estate were thought to be a good investment as they bet their exit strategy on multiples expansion. This was especially attractive as the US was getting overpriced or slowing down, India seemed like a good place to invest. With the slowdown in India in these sectors their exit strategy is not happening. the investments that will make some coin in the future are the more difficult "roll up the sleeves" type - where there are real operational improvements in the purchased asset to create value (they use the increased cash flows to increase their equity positions).
Couldn't agree more with you. The PE bubble has really been pricked. There anyway was too much PE money chasing too few quality deals in India. Mind you, nearly every PE deal in India is "growth capital" investing, none of the traditional stuff like LBO/MBO and distressed situation investing or even something like hostile takeover. PE game in india is /was a one trick pony.

Thats a lot harder than just riding out a booming stock market or real estate market and then selling at high multiples, so I think there will be less institutional investment over the course of the next two years as PE / Sovereign money look to buy cheaper distressed assets in the US over relatively overvalued Indian assets. That will slow things down considerably in India, people who bought over the last 2 to 3 years may be in a rude shock when they try to sell their homes....
Yup. The real estate scene in India will be dead as nails for the next couple of years atleast ( I would think 3 to 5). It is back to the 1995 to 2000 scene, when real estate prices in real terms stagnated after the boom earlier. What we are seeing now is a classic boom -bust cycle in real estate . That has to absolutely deflate. Folks who bought in the past 3 years are going to see negative real returns for the next 5 years or so and for highly leveraged buyers increasing distress and negative equity even.

I think the stock markets are overvalued in many sectors on a fundamental basis as well. The slowdown is real and palpable , liquidity is decreasing and we will see higher risks getting priced into the markets when the bubble bursts in RE and other sectors start reflecting in the balance sheets of the financial sector.

All in all.. hold your horses boys. Sick to cash and near cash.. I had mentioned 6 months ago , that for the next 1 year on a risk adjusted basis the Fixed Deposit, which gave around 9 to 10% was the best bet. I still stick with that. Nothing else will give you that kind of safe return.

Just a word of advice.. Run to the good "safe" PSU bank (IOB, Canara etc ) and put your money. Stay away from ICICI etc. ICICI are a bunch of gun slinging cowboys .Diversify your money and dont put all in one place. SBI the govt will guarantee it, so they should be okay as well,despite the exposure to real estate and other doubtful stuff like 2 wheeler and personal loans.

Time to be extremely risk averse.

The real estate will depend on the income levels. As income levels are still rising, people will still need to purchase houses. But the prices will probably fall, as the house prices have gone beyond the levels of affordability for normal people.

AshokS · Post by **AshokS** » 15 Sep 2008 18:59

Vina / Suraj -

I need to get better connected with the Indian PE scene. What are good groups, forums, or sites for PE investors or i-banking in India? Specifically I am looking to do deals in India with primarily public companies looking for convertible debt (range from upto $30 mm per deal). You guys seem well connected, thought I would ask. I have asked a few India based i-banking friends, but still trying to get into the deal flow. Email me at skm DOT pave AT gmail DOT com.

prahaar · Post by **prahaar** » 15 Sep 2008 19:19

The "bust" in the real-estate market atleast in Vadodara,Gujarat is not very visible. House prices continue to rise, even at this juncture property price atleast in one area in Vadodara have risen ~20% compared to February 2008 (and I am led to believe from other local info, that this is a very common appreciation value). Is the "bust" mainly applicable to higher ranges? (say > 50 lacs)

Suraj · Post by **Suraj** » 15 Sep 2008 23:55

AshokS: I can't help you out with that. Vina might know, as might some other members here involved in the PE industry at home. I think durvasa was among them, unless I got the member names mixed up. You might consider posting in the NRI investment in India thread. That thread had a lot of folks posting on the general theme of investment in India, though it may not address your need.

Katare · Post by **Katare** » 16 Sep 2008 00:58

Rupee hits 2-year lows as stocks fall weighs Rs46.05/$

That adds up to ~18% depriciation of Rupee from it's high of Rs39/$. Paki Rupee has depriciated around 26% from its Rs60/$ level to Rs76/$ level.

Global events drag oil below $95

This might help a little........

John Snow · Post by **John Snow** » 16 Sep 2008 01:11

Consumer banking like BOA buying Investment Banking firm ( even by Stock pmts) is bad because now the liquidity of consumer bank is on the line, unless most of the assets of BOA were with the Investment bank in this case Merrill Lynch.

Suraj · Post by **Suraj** » 16 Sep 2008 01:17

The Rupee's course seems to be driven more by sentiment than fundamentals right now. Oil is down with Hurricane Ike not affecting supplychains as much as feared, export growth is accelerating month-to-month partly driven by the falling Rupee, which in turn has caused the industrial growth rate to accelerate as well, from the first quarter ennui. There hasn't been large scale FII sales, and FDI remains robust, with first quarter (Apr-June) FDI inflows exceeding $10 billion. Liquidity conditions are a bit tight now, with call rates above 12% . Pretty soon the Rupee is going to head north.

John Snow · Post by **John Snow** » 16 Sep 2008 01:31

Rs will head north only if $ slide south, with near stagflation in US ( the scare city of {NY} $) will actually improve intrensic strength(of $). This is why oil is trading below $100 ( one of the factors), there is no more money to mop up unless by printing, if Feds do that then they can join Robert Mugaube at the bar table singing Song sung blue every body singing blue...

Suraj · Post by **Suraj** » 16 Sep 2008 01:44

By swapping Fannie/Freddie's riskier debt with treasury bonds, they are essentially backing those two using the faith in the dollar, and in the process eroding the value of the dollar. They will end up printing more money as they plan to capitalize Fannie and Freddie are executed. Plus there are the wars the US is fighting. Wars destroy the value of a currency, as do the actions of the US now to keep its financial system afloat. Of course, these are more long term fundamental considerations. In the short term, sentiment prevails, as is the case now with the Rupee. Any time there's a significant change in direction of the dollar or in particular, dollar denominated assets, we'll see some volatility in the Rupee as currency contracts unravel. I'd probably wait a month or so and look at where the Rupee is then, before giving its current behaviour serious consideration.

vsudhir · Post by **vsudhir** » 16 Sep 2008 01:47

IMO, desi mkt has figured in the burgeoning effects of next pay commission, coming $100 billlion in N-plants, boondoggle schemes such as NREGs etc on the fiscal deficit.

One reason why the Re ain't rising against the $$ just yet could be that rupees are (or eventually will be) entering circulation 'faster' than $$ are, as a poportion of the Indian and US economies respectively, perhaps?

Suraj · Post by **Suraj** » 16 Sep 2008 01:57

vsudhir: The problem is that so many things are in flux right now that it is rather difficult to attribute something to fundamental reasons right now, including the direction of the Rupee. A cursory examination of the current economic dynamics would suggest it ought to be going in the opposite direction from the one it's currently heading in. Structural impediments like the fiscal deficit are standard considerations that were true even when the Rupee was appreciating. It might be better to wait and see - too many things are up in the air right now.

Katare · Post by **Katare** » 16 Sep 2008 02:05

I think its more sentimental than fundamental but some of those sentiments are based on fundamental macros

.......like worsening trade deficit (~10% of GDP) persistent and widening balance of payment/current account deficit. Mounting subsidies causing fiscal deficit to reach close to ~10% of GDP, double digit inflation, thigh liquidity and slowing export markets economies. These are ideal conditions for real depreciation in Rupee value.

Again the depreciation may not be all that bad (except for inflation control) actually it was the whole point of having a partially floating currency. The Rupee’s direction is reflecting the ground realities of worsening macros and sentiments driven by global turmoil.

I hope Oil prices will come down and sustain @ $60-70 level in next couple of months.

Sanjay M · Post by **Sanjay M** » 16 Sep 2008 02:26

Indian politicians are more sensitive to inflation because it upsets the masses, while any rise in the rupee doesn't bother them, since they don't care if the export businesses get hurt.

Strange that Emerging Markets are getting dumped, tho:

Emerging Markets-Assets smacked down by Wall Street ructions
Mon Sep 15, 2008 2:48pm EDT

*Investors dump emerging market assets

*Emerging sovereign debt spreads widest in three years

*MSCI emerging stock index at fresh two-year low.

vera_k · Post by **vera_k** » 16 Sep 2008 03:09

This is also the start of the demographic transition in the US with the baby boomers retiring. This demographic trend will only get worse until 2025 or so when the baby boomer echo starts geting into their peak earning years.

My take is that between now and 2025 there is huge opportunity for the outsourcing industry to capitalize on the need for cost reduction forced by the demographic trend.

Nayak · Post by **Nayak** » 16 Sep 2008 08:44

How a weekend changed life for Merrill staffers
16 Sep, 2008, 0407 hrs IST,Prashant Mahesh, ET Bureau
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MUMBAI: For Ashish (name changed), a wealth manager with Merrill Lynch, all was well at the workplace last Friday, when he logged out for the weekend.

But the sense of well being was shattered on Monday morning when while driving to work, a colleague called him to inform him that his company had been sold to Bank of America.

It took him a few minutes to take in the enormity of the swift developments, which will have a deep impact on the professional lives of Ashish and hundreds of his colleagues at Merrill Lynch that is considered as one of the bulge-bracket financial services firms of the world. Merrill Lynch employs over 500 professionals in India.

“Overnight, the transaction happened between Bank of America and Merrill Lynch. Our fate hinges on the developments in the US and I am clueless about my immediate future,” says an employee who works in the wealth management team at
Merrill Lynch in Mumbai.

“Indian banks refuse to deal with me today. I am finding it difficult to liquidate my positions today,” says a desperate bond dealer with Merrill Lynch, India. He fears he will lose his clients soon. What does he do in such a situation?

While he attempts to regain his focus and tries to carry out a trade, another colleague tells him that veteran Andrew Holland, who was in the equities team, has put in his papers and that part of his team was headed for Ambit Capital.

As the news broke out, employees in various departments at Merrill can hardly focus on their work, knowing that their life will not be the same again. Clearly, most employees ET spoke to had hardly any clue about how the latest developments would pan out and the view that the new owners, Bank of America, would take on the operations of Merrill Lynch in India.

It was but natural that on Monday many of the relationship managers and a lot of the sales force, skipped their usual round of meeting with clients.

“How do I reassure my client that I am going to be servicing him, tomorrow when I am so uncertain myself,” says a hapless relationship manager. “Most of my clients are asking me the same question. Will you continue to handle my portfolio or leave.”

In fact, the first question which foreign bank relationship managers have to face from clients is how stable their bank is to which none of them have an answer.

“Despite having met my targets, I have to live in an uncertain environment, thanks to the happenings in the US,” says the relationship manager at Merrill Lynch.

“Today, clients are more worried dealing with foreign banks than Indian banks,” says another employee working with ABN Amro, which was taken over recently by Royal Bank of Scotland.

What has compounded their woes is the fact that changing jobs looks difficult in local markets, given the slowdown in activity. With investment banking, institutional broking and wealth management seeing a downturn due to the markets, jobs in these areas are tough to come by, since there is hardly any firm hiring.

While a lot of it is evident at Merrill Lynch, India, today, signs of pain amongst employees in foreign banks have been visible for some time now. A lot of banks decided to go slow on the asset side of the business, leading to transfer of people across departments. This has left employees a bit baffled, though the consoling fact for them is that there are no job cuts.

In case of one foreign bank, which went slow on its asset business, frontline sales staff were told to move to collection. “Essentially, this is a shift from the front office to the back office, which disturbs my career,” says one helpless employee.

Another foreign bank, which started operations in India less than two years ago and has spent huge sums in hiring personnel, is suddenly on a cost-cutting spree. It plans to shift its back office from Worli (south Mumbai) to Goregaon in suburban Mumbai.

With the broking business going slow, an Indian broking firm backed by a bank, shifted a few staffers to the branches, where it plans to expand aggressively. Clearly, the going is uncertain and the next few months are going to be a testing time for a lot of bank employees as global events unfold in the near term.

Singha · Post by **Singha** » 16 Sep 2008 08:47

suddenly the crusty old SBI-Mysore and Canara bank look good to me. I will renew my
faith in them this weekend by shifting away cash from ICICI.

Nayak · Post by **Nayak** » 16 Sep 2008 09:00

ICICI bank is one shady operator. I dont trust it's business practices. Too aggressive and too flashy for my taste. Entire family believes in SBI and Vijayabank onlee.

No private banks. The only reason I hold citibank a/c is because it allows me to pay all the bills online and good for buying stuff online.

All other transactions and funds buried in desi banks.

Nayak · Post by **Nayak** » 16 Sep 2008 09:04

Dad was advising me that the investment has to be diversified into

Liquid cash - 10 % (meet emergency expenses)
Fixed Deposit - 50 % (Retirement Fund)
Savings Bank - 10 % (Medium term expenses)
Gold - 30 % (guard against volatility)

I heeded his advice and did not invest in stock markets. So even though the growth rate is not much, over long term there are no headaches and money is safe if I live a simple lifestyle.

Sanjay M · Post by **Sanjay M** » 16 Sep 2008 09:28

Bubbles don't happen in rapid sequence, but with major timespans in between.

So after a bubble has burst, it's actually usually good to go into the market, so that you can enjoy a long span of growth before the next bubble happens.

The problem is, this current bubble definitely isn't over yet. AIG, WaMu, and a number of other major institutions are going to have to hit with a thud, first.

The only bright side from these bubble disasters, is that they chasten and reform the market, in their aftermath.

US govt will probably bring back the Glass-Steigall Act after this.

svinayak · Post by **svinayak** » 16 Sep 2008 09:51

What is the good thing to buy now.

I want to buy somthing.
Real estate, etc.

archan · Post by **archan** » 16 Sep 2008 10:11

Nayak wrote:ICICI bank is one shady operator. I dont trust it's business practices. Too aggressive and too flashy for my taste. Entire family believes in SBI and Vijayabank onlee.

No private banks. The only reason I hold citibank a/c is because it allows me to pay all the bills online and good for buying stuff online.

All other transactions and funds buried in desi banks.

They send statements by email, even your balance etc. I would get somebody's statement in my mailbox and I don't live in India or have an account with that bank. They just sent it to me without checking the last name even though my mailbox address had my first and last name in it. So I could see that dude's bank balance. I laughed at their practices.

Rupesh · Post by **Rupesh** » 16 Sep 2008 12:00

TCS, Wipro recast hiring plans
AHMEDABAD: As the heat of global slowdown spreads, several players in the IT and ITeS sector have modified recruitment policies, keeping them in sync with the changing market conditions and their pockets. The likes of TCS, Wipro and Keane are either going slow on recruitment or are hiring more number of trained hands.

“During 2008, recruitments in IT/ITeS sector has seen a fall of 20-22 % as compared to the same period last year. The players have become more cautious,” says Bangalore-based HR firm Ikya Human Capital Solutions chairman Marcel Parker.

“There is a delay in decision making. While most IT firms have deferred their hiring, some have postponed their training programmes. A few have opted for judicious justin-time recruitment process,” Parker told ET.

TCS, that recruits about 18,000 employees every year has decided to make significant cuts in recruitment patterns to tide over the crisis. “This year we are not going for any mass recruitment.

We have cut down on at least 20% of the total recruitment,” said a senior HR official of TCS in Gujarat. “Our focus has largely been to hire more experienced candidates than go in for fresh recruits”, the official added.

Similarly, international IT firm, Keane is not just going slow on recruitments, but have also adopted a ‘just-in-time-approach’ on hiring. “Since the last three years, we used to hire 30-40 % more people than the previous year. But this year we are sticking to almost the same number of people we recruited last year”, said Keane India senior VP S G Raja Sekharan.

“Since January we have already made job offers to 3,000 students, which is in the range of what we had did last year. We do not want to make job offers and scale back (if market conditions deteriorate),” he said.

“The confidence level in the markets is low compared to the levels that existed three years back. It is very difficult to forecast where the markets are headed in the recent future,” Mr Sekharan said.

IT-giant Wipro has introduced stringent ‘quality measures’ into their hiring pattern. “We have made our process even more stringent and brought in measures to ensure quality of hire. Innovative measures have been introduced including setting up a Talent Quality Group within Talent Acquisition”, said Wipro Talent Acquisition VP Pradeep Bahirwani.

In order to hire quality manpower, Wiro has also started campus hiring in US and UK. “We have pioneered programmes like Wipro Academy of Software Excellence (WASE) which helps graduates learn while they work on projects with us. We have an active campus program in India and have also started campus hiring in US and UK,” he said.

http://economictimes.indiatimes.com/New ... 487861.cms

Singha · Post by **Singha** » 16 Sep 2008 12:15

Satyam has let 1000 people go and no payhikes for 3500 per TOI.
someone was saying Wipro to let go a 1000 yesterday...

vina · Post by **vina** » 16 Sep 2008 17:10

AshokS wrote:Vina / Suraj -

I need to get better connected with the Indian PE scene. What are good groups, forums, or sites for PE investors or i-banking in India? Specifically I am looking to do deals in India with primarily public companies looking for convertible debt (range from upto $30 mm per deal). You guys seem well connected, thought I would ask. I have asked a few India based i-banking friends, but still trying to get into the deal flow. Email me at skm DOT pave AT gmail DOT com.

Ashok Saar. Me on inbeshment banker in India. Me honest abdul in the Karporate Strategy /Development side onree, enjoying peace and quiet and the stress free life in salubrious Bengalooru . I-Bank/ consulting/vonsulting ka tension nahin lene ka , humko. Now phamily man onree.

I have no contacts with the i-Banks (and actually wont be allowed to as that would violate company policy,since I would have operations and stock and market relevant info) and private equity houses. I dont get to speak with the i-Banks and PE houses and dont get my hands dirty with deal execution. I get to see the deal flow from evaluation, vetting , strategic fit , synergy yada yada angles and ask questions to the folks who interface with i-banks/media/journos etc and they get back with answers.

In fact, I got a pitch from Lehman passed to me last week about an opportunity in a certain space, and I laughed to myself and said that I will look at it if Lehman lasts 2 weeks. It didn't

, so didnt even have to take the trouble to respond to that e-mail pitch presentation

.

My comments are based on macro scene and just spectator watching the game being played.. all my playing in the markets is on personal side onree.

Sorry, couldnt be of help.

Rupesh · Post by **Rupesh** » 16 Sep 2008 17:45

ICICI Bank has Rs 375-cr exposure in Lehman Brothers

http://economictimes.indiatimes.com/ICI ... 490271.cms

vina · Post by **vina** » 16 Sep 2008 18:01

Rupesh wrote:ICICI Bank has Rs 375-cr exposure in Lehman Brothers

http://economictimes.indiatimes.com/ICI ... 490271.cms

BR ahead of the curve as always!!

. We were just talking about how to skip ICICI and park funds in good 'ol PSU banks yesterday. proved right again.

But frankly this 57m Euro / 375 cr is chicken feed. The Lehman thing is not the biggie. AIG is. If they default then all hell will break loose. AIG is in the hock for $75 b or so, and no way in hell they are going to raise that. even if they do , it is delaying the inevitable. AIG is the counter party /guarantor of a lot of derivates deals and in many many swap transactions. I am sure the gun slinging ICICI cowboys have massive exposure in all kinds of swaps . The cowardly Yindoo bania PSU banks, except SBI , are all too meek and small to be playing such games..

I just heard from a colleague that in India too, deposits only upto Rs 100,000 are guaranteed, just like the US FDIC's $100,000. Huge food for thought that. Be very careful of the soundness of the bank you are parking your money with in these times. FDs etc are not guaranteed.

Philip · Post by **Philip** » 16 Sep 2008 18:09

The Lehman collapse and the aftermath,is the financial equivalent of Krakatoan magnitude.It is as if an H-bomb was dropped on Wall St. and the fallout all across the globe.It is the first phase of a new US Depression.The effect upon the Indian economy will be massive.Lehman's fall is having a domino effect across the globe,with more disasters expected for the next few months.The catastrophe will be a financial asteroid that has hit planet earth.

Just one example of how real-estate is being affected.Indian real-estate is going to bomb and the GOI/FM should bring in 100% tax deductions for housing for first time buyers of housing to keep the market afloat.This was the strategy used by Ronnie De Mel,the SL Finance Minister who kept the economy afloat after the 1983 riots and the ensuing war for a decade.

Lehman Brothers collapse leaves 1m sq.ft of unlet space in Docklands
By Graham Ruddick
Last Updated: 9:24am BST 16/09/2008

The collapse of Lehman looks set to leave Songbird Estates, the Aim-listed owner of Canary Wharf, with almost 1m sq ft of unlet space.
Lehman occupies around 1m sq ft of 25-30 Bank Street, which was purpose-built for the investment bank and opened in 2003.

Canary Wharf does have a degree of protection from Lehman's withdrawal. As part of the agreement with Lehman, it had a four-year "insurance policy" underwritten by AIG, which effectively means the American insurer would pay the lease for four years in the event that Lehman could not pay it.

(Ha!Ha!As AIG itself is desperate for a $40Billion infusion of cash and may still go under itself!)

http://www.independent.co.uk/news/busin ... 31981.html
Crash! Shares tumble as Lehman Brothers collapses and fears grow for AIG

By Stephen Foley in New York
Tuesday, 16 September 2008

Emergency talks on the future of AIG, which has operations across the globe and is deeply enmeshed in the world's financial markets, continued all day with no resolution, causing panic selling on the stock market.

Banks set up $70bn bail-out fund to bolster confidence

The great Wall St earthquake
A global banking crisis was last night threatening to spiral out of control, and frantic US officials were locked in talks to save one of the world's biggest insurance companies just a day after they let one of its most powerful investment banks go to the wall.

Emergency talks on the future of AIG, which has operations across the globe and is deeply enmeshed in the world's financial markets, continued all day with no resolution, causing panic selling on the stock market.

Katare · Post by **Katare** » 16 Sep 2008 19:09

Rupee value plunges; biggest fall in a decade

Singha · Post by **Singha** » 16 Sep 2008 19:20

anyone who has money parked in dollars its a good time to funnel it back at a favourable
rate.

if AIG is the 5MT shakinah city buster being wheeled around by a one legged mentally
challenged monkey handler.....God forbid if someone like citi or hsbc take a huge hit
that will be like a 50MT tsar bomba in the backyard-the end of all life as we know it.

Vipul · Post by **Vipul** » 16 Sep 2008 20:36

Rupee hit by an invisible force.

An invisible force is stalking the dollar/rupee market and the Reserve Bank of India could do little to stanch the local currencys fast plunge.

Blame the "illegal" overseas non-deliverable forward (NDF) market.
Illegal, because such trades are not sanctioned by the Reserve Bank of India.

A NDF, as the name suggests, is a non-deliverable forward contract, in which banks buy forward dollars (book dollars today for delivery at a specified future date) in the local market for their clients and, simultaneously, sell equivalent dollars abroad, or vice-versa, so that on the delivery date they make a profit or loss, which is the difference between both the rates.

Globally, such deals are done in currencies that are not fully convertible to take advantage of -- or "arbitrage" -- the difference in the domestic forward rate and the NDF rate.

Contracts can range from one week to a year and Indian deals are mostly done in markets such as Hong Kong, Singapore and London (because their time zones match with the dealing room time here).

For example, the one-year forward rate in the domestic market is 46.70/$1 (46.05 is the rupee rate plus a 65 paise forward premium), but in Hong Kong, the same forward is quoting at 47.68/$1 -- a clear arbitrage of 98 paise.

The RBI cant do anything to stop the trades since they are executed outside its jurisdiction, on foreign shores.

"Its illegal so we cant even talk about it. But its a peculiar situation because the rupee is not fully convertible here, but countries where these trades are settled have fully convertible currencies. Also, the RBI cant just go ahead and legalise these trades because it would mean that they are jumping the regulation just because there are some players using this route," said a senior official of the Foreign Exchange Dealers Association of India.

Forex watchers said such deals have primarily pulled the rupee down to 46.05 from 42.65 a month back, a fall of nearly 8%.

Dipti Deodhar, manager risk advisory, at forex consultant Mecklai amp; Mecklai, said hedge funds and foreign investors have made merry.

"NDF arbitarge has without doubt played a crucial part in the rupee weakness. Indian diamond companies with offices in markets like Hong Kong are also trading in NDF. Foreign institutional investors pulling out of India have also used this route to hedge bets," she said.

Though clear estimates regarding the market are hard to find because of its unregulated nature, dealers said volumes have at least increased eight times from $100 million in 2003 to more than $800 million a day now.

"Volumes have increased definitely," said a senior forex dealer with a US firm familiar with the market, who did not wish to be named. "There is a view in the overseas market that the rupee will weaken further. So banks armed with dollar supplies from RBI are buying greenbacks from the domestic market and selling it in the offshore market," he said.

Volumes have increased because overseas forex dealers are increasingly looking at the rupee as another option for trade. And since the rupee is not fully convertible the best way to trade in the currency is through the NDF market.

However, it is not that the RBI is unwillingly feeding an illegal market. Dealers point out that if the RBI didnt sell dollars in the local market, the short supply of dollars could weaken the rupee in double quick time because of the desperation by foreign funds to hedge their risks.

The RBI cant do much from here except temper the flows but may be if push comes to shove, it may have to intervene in the overseas NDF market just like the Korean central bank did earlier this month.

John Snow · Post by **John Snow** » 16 Sep 2008 20:52

Full convertability is the answer, but comes with its own perils and pleasures