Don yuan causes heartbreak

1. Don Yuan Causes Heartbreak
China's currency devaluation and fears over its economic health boiled
over and scalded global markets worldwide. Souring investor view of
emerging economies added to the widespread rout as key indices from
Japan to India, Europe to the US meltedRs 7-lakh cr of investor `
wealth wiped out; rupee tumbles to 2-year low of 66.64

2. Contd..
Panic swept the global markets two weeks after the first tremors were felt when
China unexpectedly devalued the yuan. Indian stocks tumbled, crashing by the
most in more than seven years, amid a tsunami of sell orders that started in Asia,
flooded across Europe and then slammed into the US. In China itself, stocks
plunged by a level last seen in 2007, crude oil fell further and commodities
plummeted to a 16-year low. The Dow took a 1,000-point plunge at the opening.
Bloomberg said more than $5 trillion of investor wealth had been wiped out due to
the drop in equities in the past two weeks across the world.
While the rupee slid to a two-year low on Monday , stock market investors in India
lost . 7 lakh crore in the biggest single-day loss in ` market capitalisation. The Sensex
plunged 1,624 points, or 5.94%, to 25,741.56, its sharpest intraday drop since June
2009. The Nifty plunged 490 points, or plunged 490 points, or 5.92%, to end at
7,809, its heaviest intraday slump since October 2008.

3. Contd..
The NSE Index VIX, which measures volatility, clocked a record intraday gain
of 64% to 28.13, reflecting extreme global nervousness about the ability of
the Chinese government to prevent a slowdown that could inflict severe
damage on many economies around the world.
As investors counted their losses on Monday evening, Prime Minister
Narendra Modi led a high-level review of the situation. He favoured pushing
ahead with ongoing reforms and suggested consultation with stakeholders to
chalk out the agenda for future. The government ruled out any immediate
package. The meeting was attended by Finance Minister Arun Jaitley,
Minister of State for Finance Jayant Sinha and senior officials of the ministry.
Earlier in the day, Jaitley and Reserve Bank Governor Raghuram Rajan sought
to calm jittery investors.

4. Contd..
Jaitley said the rout was “transient and temporary in nature“ and had little
relation to India. “The factors responsible for this are entirely external,“ he
said in Delhi. “There is not a single domestic factor in India which has either
contributed to it or added to it,“ Jaitley said.
Rajan said India's macroeconomic underpinnings were sound and that its
reserves could be deployed to protect the currency .
“India is better placed compared to other countries with low current account
deficit, and fiscal deficit discipline, moderate inflation, low shortterm foreign
currency liabilities, very sizeable base of forex reserves,“ he said. “We will
have no hesitation in using our reserves when appropriate to reduce
volatility in the rupee.“
The rupee weakened to 66.64 against the dollar, its lowest since September
2013. India's foreign exchange reserves are at a record $355 billion.

5. Contd..
Finance Secretary Rajiv Mehrishi told ET NOW that India would take
measures, if these were needed, in a calibrated manner.
“Since India's fundamentals are strong, the situation is not alarming,“
he said. “The primary response has to come from the central bank. I
think they look at the currency position and see what they have to do.
The policy response from us will have to be more calibrated and
calculated. We may need to take several steps at several fronts. At this
point it is enough to say that the government will take such steps which
are necessary.“

7. LATE RECOVERY IN US
In the US, stocks recovered helped by a turnaround in Apple's shares after
crashing across the board as the market opened with Google, Amazon,
General Electric and Microsoft among those sliding, Bloomberg reported. At
11.55pm (India time), the S&P 500 was down -2.74% at 1,916.29 in New
York. The gauge pared a drop of as much as 5.3%. The Dow Jones Industrial
Average was down 402.6 points, or 2.45%, at 16,057.15. It had lost 669.73
points, or 4.1%, during opening trade -its steepest drop since November
2011. Nasdaq Composite was down 115.59 points, or 2.45%, at 4,590.45.
Earlier in the day, the Shanghai Composite Index posted its biggest one-day
percentage loss since 2007, closing 8.5% lower.
In India, foreign institutional investors (FIIs) sold stocks worth Rs 5,275 crore
on Monday . In the past four trading sessions, they have sold shares worth
about Rs 9,000 crore. Domestic institutional investors (DIIs) bought shares
worth Rs 4,097 crore on Monday .

8. Contd..
“Nobody anticipated this drop on Monday,“ said Motilal Oswal, chairman &
managing director of Motilal Oswal Financial Services. “The markets may
take some time to stabilise.
Reports of margin call pressure and foreign fund selling made things worse.
However, one should remember that our macroeconomic fundamentals
continue to remain strong. I see very good opportunities to buy for medium
to long term.“
Veteran investor Jim Rogers said it was important to know when to get back
into the market. “Markets around the world are collapsing -September,
October are usually very bad times in financial markets and this year is going
to be very bad,“ he said. “So many things will go down artificially, at which
point one should buy, whether it's oil or shares.“

9. FUTURE UPBEAT FOR INDIA
But the future appears upbeat for In dia, feel some experts.
“In the short term, it is hard for any country to differentiate itself...Over the longer term,
however, stronger fundamental economies such as India have the potential to bounce back
more quickly and outperform,“ Allianz's Chief Economic Adviser Mo hamed El-Erian told ET
NOW.
On Monday, the CNX Midcap Index dropped 8.77%, its biggest intraday fall since 2008.
“It's difficult to measure the current crisis in Chinese stock markets and its impact on global
equities,“ said S Na ren, chief investment officer, ICICI Prudential Mutual Fund. “We believe
the commodity exporters will be the worst hit in this decline. However, we would like to
suggest that fixed-in come and long-term equity investing provide good opportunities.“
“It's not a good situation for markets; there is reasonable pain ahead of us,“ said Shankar
Sharma, vice-chairman & joint managing director, First Glob al. “Things have gone beyond
being called a phase of correction.“

10. MARGIN CALL PRESSURE
Some influential traders faced mar gin call pressure after the Nifty broke
crucial technical support levels of 8200, 8000 and 7800, accentuating the
market decline. Margin calls were triggered after brokers failed to col lect
money from clients who had taken leveraged positions on stocks with ex
pectations that markets would go higher.
“The trend line for markets has turned negative after Nifty broke crucial
support levels of 8,080 and 7,940. The next support level for the index is
seen at 7,700,“ said Dharmesh Shah, head of technicals at ICICI Securities.
“The Nifty's 200-day moving average of 8458, which was the previous
support level, has now turned the resistance level for the index.“
Rajan seemed to indicate that the current strife wouldn't have any bear ing
on interest rates.

11. “Rate cuts should not be seen as goodies that RBI gives out stingily
after much public pleading,“ he said. “In stead, what is important is
sustained low inflation, something the prime minister emphasised in
his Independence Day speech, and rate cuts are a natural consequence
that RBI has no hesitancy in delivering.“
RBI's next monetary policy announcement is scheduled for September
29 although there have been calls for a cut before that given the
cooling down of inflation and uncertainty about economic revival.

12. For details and bookings contact:-
Parveen Kumar Chadha… THINK TANK
(Founder and C.E.O of Saxbee Consultants & Other-Mother
marketingandcommunicationconsultants.com)
Email :-saxbeeconsultants@gmail.com
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