A win win situation:
Essentially there is no negative side to the global financial crisisfor India. One of India's largest expense is energy - oil, naturalgas. 70% of its energy is being imported. With the financialcrisis, these commodities that India is always in a dire need of, are trading at 26% of their original prices. That's a savings of 74% putting a significantly lower pressure on the Current Accountof India for FY09.
Inflation, another huge factor that was putting pressure on the economically weaker Indians is now decreasing at a fast pace. The current inflation has dropped from a range of 7%-8% to 2%-3%. India'sproductivity is still increasing, jobs are being created in most sectors adding to the GDP figures. The reason for that is simple, India has a good mix of state owned corporations and priviately owned corporations which are competing with each other in the domestic market.
An example of this is State Bank of India, which as the name suggests is a state owned bank, is competing with private banks such as ICICI. This is causing Indian banking system to become more efficient than its foreign couterparts. Infact some foreign banks such as those from Canada, will need 10 years to reach the same level of efficiency as Indian banks.
Surprisingly in the IT outsourcing sector, companies such asInfosys are looking to hire more graduates this year to higher meet demand. Other IT majors such as Tata Consulting Services (TCS) are baggingnew deals in this environment where their biggest selling point islowering costs in a market slowdown. So IT outsourcing is even hotter now than it was in the past years for Indian IT firms. To top the desert with cherry, Indian Rupee has now become cheaper for most developed nations making outsourcing to India even more tempting.
Moreover, there is a significant increase in capital investment in Indiaby Indian firms such as Tata Motors, Mahindra & Mahindra, Hindustan Aeronautics Ltd (HAL) to mention a few who are foraying in developingnew vehicles for consumers and defense needs of India. This meansthat within a few years when the development of these forays has reached its potential, India will be less dependent on foreign hardware technologies inadvertently increasing its Current Accountat a even higher level in terms of percentage with other developed nations.
Then why is the market sluggish? Harshad Mehta once said "...stock market is a by-product of the human mind..." What Harshad Mehta was trying to say in this statement was that its not just the intrinsic value of a firm that markets look at, rather market participants bring in their own perceptions. Its these perceptions that become a key factor in the valuation process of a specific investment decision and cumulatively these perceptions make or break a market.
There was meant to be a correction, and that to a major correction globally. However, the correction went over board especially when short sellers started to put downward pressure on financial stocks globally. Currently there are many firms that are trading below their book values due to this over correction.
India's capactiy for productivity has not been affected either in terms of its capital - physical or human. India still is able to grow faster than most developed and developing economies. All of these elements point towards one fact - India is going to come out of this so called "global crisis" as a winner.
Vanmeet Talwar
(These are purely my opinions based on my research on the topic, if you are looking to invest in India please consult with your broker and do not use this as your basis for investing in India. I do not take any responsibility for the performance of your investments)
Essentially there is no negative side to the global financial crisisfor India. One of India's largest expense is energy - oil, naturalgas. 70% of its energy is being imported. With the financialcrisis, these commodities that India is always in a dire need of, are trading at 26% of their original prices. That's a savings of 74% putting a significantly lower pressure on the Current Accountof India for FY09.
Inflation, another huge factor that was putting pressure on the economically weaker Indians is now decreasing at a fast pace. The current inflation has dropped from a range of 7%-8% to 2%-3%. India'sproductivity is still increasing, jobs are being created in most sectors adding to the GDP figures. The reason for that is simple, India has a good mix of state owned corporations and priviately owned corporations which are competing with each other in the domestic market.
An example of this is State Bank of India, which as the name suggests is a state owned bank, is competing with private banks such as ICICI. This is causing Indian banking system to become more efficient than its foreign couterparts. Infact some foreign banks such as those from Canada, will need 10 years to reach the same level of efficiency as Indian banks.
Surprisingly in the IT outsourcing sector, companies such asInfosys are looking to hire more graduates this year to higher meet demand. Other IT majors such as Tata Consulting Services (TCS) are baggingnew deals in this environment where their biggest selling point islowering costs in a market slowdown. So IT outsourcing is even hotter now than it was in the past years for Indian IT firms. To top the desert with cherry, Indian Rupee has now become cheaper for most developed nations making outsourcing to India even more tempting.
Moreover, there is a significant increase in capital investment in Indiaby Indian firms such as Tata Motors, Mahindra & Mahindra, Hindustan Aeronautics Ltd (HAL) to mention a few who are foraying in developingnew vehicles for consumers and defense needs of India. This meansthat within a few years when the development of these forays has reached its potential, India will be less dependent on foreign hardware technologies inadvertently increasing its Current Accountat a even higher level in terms of percentage with other developed nations.
Then why is the market sluggish? Harshad Mehta once said "...stock market is a by-product of the human mind..." What Harshad Mehta was trying to say in this statement was that its not just the intrinsic value of a firm that markets look at, rather market participants bring in their own perceptions. Its these perceptions that become a key factor in the valuation process of a specific investment decision and cumulatively these perceptions make or break a market.
There was meant to be a correction, and that to a major correction globally. However, the correction went over board especially when short sellers started to put downward pressure on financial stocks globally. Currently there are many firms that are trading below their book values due to this over correction.
India's capactiy for productivity has not been affected either in terms of its capital - physical or human. India still is able to grow faster than most developed and developing economies. All of these elements point towards one fact - India is going to come out of this so called "global crisis" as a winner.
Vanmeet Talwar
(These are purely my opinions based on my research on the topic, if you are looking to invest in India please consult with your broker and do not use this as your basis for investing in India. I do not take any responsibility for the performance of your investments)
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