India's stock market

Discussion in 'Wall St. News' started by qtip, May 17, 2004.

  1. qtip


    With so much promise with the India's economy, how do you think the Bombay Exchange's collapse will effect India's futures?

    Just curious to hear other views


  2. The reason for the collapse is pure political uncertainty; no one expected the BJP to lose, and no one knows what kind of deals the incoming PM will have to make to hold together a majority.

    Odds are that economic reforms will be sustained, but with the communists leveraging a minority position you can't be sure. If populism takes hold, reform progress could be set back anywhere from six months to five years. On the other hand, the Indian communists have been reasonable in some areas, so it's a toss up.

    Not much to do in a situation like that except wait and see, unless you are a long term value investor with faith that India's new government won't screw things up too badly.
  3. jrs3


    Collapse? that market doubled in 9 months from 2900 to over 6000 in a very short time, do you think it is suppose to keep going up hahaha, looks like a return to reality.
  4. Mecro


    It also has gone nowhere in 2 years so whats ur point?

    The problem is the sudden 11% drop even if it is a volatile market. It could just because it is a REAL market where volatility and movement are welcome, like Russia.

    India can go into some serious bullcrap right now. Threatening nuke war with Pakistan, that can't be good.

    The outsourcing craze can come back and bite the CEOs in the ass right now. How interesting would it be to watch this overinflux of jobs come back and the wages soar because of the lack of supply.
  5. Darkhorse, I've heard that this swift downturn was due to political uncertainty too. I've heard some unsavory things about Mrs. Sonia Gandhi, or at least things that might increase uncertainty. Other than that I don't pretend to know what is going on specifically as I have not had the time to research it. Thank you for helping educate me and others here.

    I am wondering if you could educate us further and give your opinion on the recent, and somewhat severe, downturns in China and Russia. Are there specific factors driving each market or is it simply a pullout from the high yielding emerging markets in general?
  6. Mecro


    I know why Russia corrects like that but I would love to hear Darkhorse's answer
  7. Unwinding the reverse carry trade is a big part of it; no one wants to be trampled in another stampede for the exits.

    Russia has a President looking more and more like a dictator and a terrorist problem in Chechnya growing more serious by the day with another recent assassination; in a favorable macro climate those little issues can be overlooked, in an unfavorable one they can't.

    China has a serious overinvestment problem and no clear way to deal with it. If they revalue their currency by a small amount, say 5%, that might only encourage speculative capital flows in expectation of further revaluation. If they revalue by a larger amount, say 10-20%, they give their export business to the neighbors.

    Meanwhile, the overinvestment danger is becoming clear to smarter players: unused infrastructure is a massive waste in the short run and can take decades to recoup, as telecom investors found out in the US. - not to mention China's banks are rotten to the core.

    Nobody can stomach a plummeting dollar right now; with oil as strong as it is, an overly strong Euro would be a deflationary killer for Europe, and Asia doesn't have enough internal strength to wean itself off the US consumer.

    Add in rising interest rates and the potential for a short term bounce, and you have flight to quality back to safe haven US assets.

    In an environment like this, risk appetite is significantly diminished and quality is the watchword of the day. I think a lot of situations can be understood by looking at risk appetite and understanding how conditions alternate between favoring high octane on one side and safety on the other.

    The emerging market / junk bond holiday was based on a relatively stable period where the fed broadcast its intention to keep rates low and trends were under control, so everybody got loaded with permission from the headmaster. Now all those stable trends are becoming unhinged at once. We're at the top of a roller coaster and we can't see what's on the other side.
  8. jrs3


    Who cares, I sure don't.
  9. That's one thing I'm curious about - why do people feel compelled to share their lack of interest?

    Do you approach women in bars to let them know you're not attracted?
  10. is she the granddaughter of mahatma gandhi?

    #10     May 17, 2004