Presentation on Sub-Prime Crisis

1. Sub-Prime Crisis And Its Impact On Indian Business BY: Ashish Gosain Pallavi Singh

4. Enters Financial Institutions WHY High demand for Houses WHY Low Interest Rates WHY To help American B

5. Mechanism of Sub-Prime Loans Financial Institution BANK Institutional Investors LOANS AT LOW INTEREST RATE AMERICAN B AMERICAN B AMERICAN B LOANS AT HIGH INTEREST RATE Divides this loan into Smaller loans and Pass on it to American B SECURTISES THE LOAN SELL SECURITIES PAYMENT FOR SECURITIES REPAYMENT OF IT’S LOAN TAKE MORE LOAN EMI

6. Everything Upside Down USA home ownership rate increased from 64% in 1994 to 69.2% in 2004 due to Sub-prime home loans Between 1997 to 2008, House Price increased by 124%, due to high demand And less supply of houses Due to unrealistic price of property, US Federal Reserve increased the rate Of interest on home loans Increase in Interest Rates Increased Floating Home Loans High Floating Home Loans = High EMIs Borrowing lessened Supply was More Demand was Less Price of the Houses Came down

7. CRISIS High EMIs hit the Sub-prime borrowers hard Payment to Institutional Investors stopped, Leading to huge losses Due to crash in the real estate Prices, their Mortgage based Securities were almost worthless Investors stopped buying securities From institutions. Now there was no buyer For securities from these institutions. These institutions could not pay back the loan That it had taken from big banks. So everything messed up!! CRISIS BEGINS

8. Hurting India These big investors invest in certain proportions in the world. They had losses in USA. They needed more money to invest In USA. So they started withdrawing money from different countries Indian market was booming At that time. So investors Took their money out from The Indian market and invested In USA to recover their Losses. Due to high % of FII, excess selling and less buying in the Stock market; prices of share decreased. Melting down the market. Due to flight of Foreign money From the Indian Market, value of Rupee depreciated

10. Impact on India: The Good , Bad & Ugly Least Impact Mildly Impact Most Impact Oil & Gas Media & Entertainment Auto Retail Hospitality and tourism Banks Financial Services Real Estate Information Technology

11. Suggestions Look For Domestic Demand Sound Banking Practices Limited Investment in Abroad by Indian Companies IT relations with other economies Decrease in FII percentage Encouragement of FDI

12. CONCLUSION Impact Of Sub-Prime Crisis Is Limited In India, But it will definitely slowdown the rate of growth of India. IT companies will see unemployment in the future. This will further hamper the production process which is vital to run the engines Of the development process. Lack of confidence in the international market worsen this crisis Cause inflows of FDIs and FIIs will be less. But as India will be growing at more than 5% It still remains a hot venue for investment. At the end of this crisis, India will emerge out to be a strong nation economically and as well as politically.

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