The document discusses Standard & Poor's decision to assign India a negative outlook while affirming its BBB- sovereign credit rating. It provides background on sovereign credit ratings and explains S&P's rationale for the negative outlook, citing India's high fiscal and current account deficits, slowing GDP growth, and challenges with fiscal consolidation. The summary discusses potential impacts of the negative outlook like increased chances of a downgrade, currency depreciation, market declines, and difficulty with overseas borrowing. It also examines India's economic challenges and risks of not addressing fiscal issues, as well as responses from Indian officials who see the outlook as a warning but not a cause for panic.
India’s rupee has been the worst performing currency in Asia, excluding Japanese yen since August 2011. It declined by nearly 22% from August 2011 to December 2011. Although the currency stabilized somewhat in February 2012 after the intervention from Reserve Bank of India, the pain seems far from over. Given the macro-economic situation, both domestically and globally, we might see further depreciation in rupee and we might have to adjust ourselves with lower levels of currency in times to come.
1. The document provides an overview of 10 key things to know about the currency market, including that FX trading occurs 24/7 globally, there is no central exchange, leverage can be high, and central bank decisions are major market movers.
2. Carry trades involve borrowing low-yield currencies to invest in high-yield currencies and work best in stable low volatility markets with risk appetite.
3. Central banks can intervene in currency markets by buying or selling their own currency to influence exchange rates and maintain monetary policy goals.
The document discusses the global financial crisis and its impact on India. It first defines recession as a period of declining GDP for at least two quarters. It then discusses how India's GDP declined in 2008 Q3. It explains that the US subprime mortgage crisis arose from rising mortgage defaults, which spread globally and impacted India through decreased exports, investment, and jobs as financial institutions cut costs.
The document provides an overview and analysis of the Indian stock market and recommends "buy" ratings for several stocks. It discusses the recovery of the global and Indian economies from recession, and predicts continued growth in India and other developing economies. It then analyzes the long-term bullish outlook for the Nifty index based on a technical pattern and sets a target of 6,400 levels. The remainder summarizes investment recommendations for several companies across sectors, providing buy ratings and 12-month price targets for each.
The document discusses the closure and conversion of term finance institutions in India in the early 2000s and arguments for and against reviving such institutions. It provides details on the roles and functions of development finance institutions (DFIs) and term finance institutions pre-2000s in India. It notes the problems with rising non-performing assets in commercial banks and argues for establishing a new National Development Bank to facilitate long-term financing and reindustrialization while relieving stress on commercial banks.
The RBI projects higher inflation even as risks to growth emerge. While there were no surprises in RBI's mid-quarter monetary policy review, it revised expected inflation in March to 8% from 7% previously, indicating a hawkish stance. High inflation is not expected to decrease quickly due to base effects wearing off and pressures from higher crude oil prices. RBI also acknowledged emerging risks to growth from moderating credit growth. The policy review offers little comfort to equity markets as it points to both high inflation and challenges to growth.
The document discusses 12 key lessons about life and learning based on the movie 3 Idiots. The lessons are: 1) Pursue excellence rather than chasing success directly; 2) Live life to the fullest each day; 3) Following your passions can lead to excellence; 4) Learning is possible through humility; 5) Current education systems put too much pressure on students; 6) Life is about managing emotions, not just intelligence; 7) Necessity drives innovation; 8) Simplicity is important; 9) Leadership should be flexible; 10) Love is boundary-less; 11) Communication is key; 12) Mediocrity should be avoided and one's potential maximized. The overall message is to seek
India’s rupee has been the worst performing currency in Asia, excluding Japanese yen since August 2011. It declined by nearly 22% from August 2011 to December 2011. Although the currency stabilized somewhat in February 2012 after the intervention from Reserve Bank of India, the pain seems far from over. Given the macro-economic situation, both domestically and globally, we might see further depreciation in rupee and we might have to adjust ourselves with lower levels of currency in times to come.
1. The document provides an overview of 10 key things to know about the currency market, including that FX trading occurs 24/7 globally, there is no central exchange, leverage can be high, and central bank decisions are major market movers.
2. Carry trades involve borrowing low-yield currencies to invest in high-yield currencies and work best in stable low volatility markets with risk appetite.
3. Central banks can intervene in currency markets by buying or selling their own currency to influence exchange rates and maintain monetary policy goals.
The document discusses the global financial crisis and its impact on India. It first defines recession as a period of declining GDP for at least two quarters. It then discusses how India's GDP declined in 2008 Q3. It explains that the US subprime mortgage crisis arose from rising mortgage defaults, which spread globally and impacted India through decreased exports, investment, and jobs as financial institutions cut costs.
The document provides an overview and analysis of the Indian stock market and recommends "buy" ratings for several stocks. It discusses the recovery of the global and Indian economies from recession, and predicts continued growth in India and other developing economies. It then analyzes the long-term bullish outlook for the Nifty index based on a technical pattern and sets a target of 6,400 levels. The remainder summarizes investment recommendations for several companies across sectors, providing buy ratings and 12-month price targets for each.
The document discusses the closure and conversion of term finance institutions in India in the early 2000s and arguments for and against reviving such institutions. It provides details on the roles and functions of development finance institutions (DFIs) and term finance institutions pre-2000s in India. It notes the problems with rising non-performing assets in commercial banks and argues for establishing a new National Development Bank to facilitate long-term financing and reindustrialization while relieving stress on commercial banks.
The RBI projects higher inflation even as risks to growth emerge. While there were no surprises in RBI's mid-quarter monetary policy review, it revised expected inflation in March to 8% from 7% previously, indicating a hawkish stance. High inflation is not expected to decrease quickly due to base effects wearing off and pressures from higher crude oil prices. RBI also acknowledged emerging risks to growth from moderating credit growth. The policy review offers little comfort to equity markets as it points to both high inflation and challenges to growth.
The document discusses 12 key lessons about life and learning based on the movie 3 Idiots. The lessons are: 1) Pursue excellence rather than chasing success directly; 2) Live life to the fullest each day; 3) Following your passions can lead to excellence; 4) Learning is possible through humility; 5) Current education systems put too much pressure on students; 6) Life is about managing emotions, not just intelligence; 7) Necessity drives innovation; 8) Simplicity is important; 9) Leadership should be flexible; 10) Love is boundary-less; 11) Communication is key; 12) Mediocrity should be avoided and one's potential maximized. The overall message is to seek
The document discusses 12 principles for life and learning based on the movie 3 Idiots. The principles are: 1) Pursue excellence rather than success, 2) Live life to the fullest, 3) Following your passion leads to excellence, 4) Learning is simple and never stops, 5) Current education systems create too much pressure, 6) Life is about managing emotions not just intelligence, 7) Necessity creates invention, 8) Simplicity is important, 9) Leadership should allow flexibility, 10) Love is limitless, 11) Communication is powerful, and 12) Mediocrity should be avoided and one's potential realized. The overall message is to seek excellence and success will follow.
http://inarocket.com
Learn BEM fundamentals as fast as possible. What is BEM (Block, element, modifier), BEM syntax, how it works with a real example, etc.
How to Build a Dynamic Social Media PlanPost Planner
Stop guessing and wasting your time on networks and strategies that don’t work!
Join Rebekah Radice and Katie Lance to learn how to optimize your social networks, the best kept secrets for hot content, top time management tools, and much more!
Watch the replay here: bit.ly/socialmedia-plan
Lightning Talk #9: How UX and Data Storytelling Can Shape Policy by Mika Aldabaux singapore
How can we take UX and Data Storytelling out of the tech context and use them to change the way government behaves?
Showcasing the truth is the highest goal of data storytelling. Because the design of a chart can affect the interpretation of data in a major way, one must wield visual tools with care and deliberation. Using quantitative facts to evoke an emotional response is best achieved with the combination of UX and data storytelling.
The document discusses how personalization and dynamic content are becoming increasingly important on websites. It notes that 52% of marketers see content personalization as critical and 75% of consumers like it when brands personalize their content. However, personalization can create issues for search engine optimization as dynamic URLs and content are more difficult for search engines to index than static pages. The document provides tips for SEOs to help address these personalization and SEO challenges, such as using static URLs when possible and submitting accurate sitemaps.
This document summarizes a study of CEO succession events among the largest 100 U.S. corporations between 2005-2015. The study analyzed executives who were passed over for the CEO role ("succession losers") and their subsequent careers. It found that 74% of passed over executives left their companies, with 30% eventually becoming CEOs elsewhere. However, companies led by succession losers saw average stock price declines of 13% over 3 years, compared to gains for companies whose CEO selections remained unchanged. The findings suggest that boards generally identify the most qualified CEO candidates, though differences between internal and external hires complicate comparisons.
This presentation explains the reasons for the fall in the value of Indian Rupee, the cause and effect. Also what the government must do to curb the fall is included.
Latin America Risks And Opportunities - Jan 2012ibarraricardo
Key risks and opportunities in Latin America for 2012. This will include an overview of our global and regional views as well as our strategy for Financial Markets in Latin American & the Caribbean.
The Union Budget for 2012-13 focused on fiscal consolidation through tax measures and limiting subsidies while also emphasizing infrastructure development and inclusive growth. Key points include GDP growth projected at 6.9% for FY12 and 7.35-7.85% for FY13, increased spending on agriculture, education, and healthcare, and measures to attract investment into capital markets and infrastructure sectors. However, the lack of major reforms disappointed markets, which declined on the day of the budget.
The Indian rupee had its worst year in 2011 against the US dollar, dropping nearly 16% due to several domestic and global factors. Domestically, high inflation and increasing crude oil prices put pressure on the rupee. Globally, increased demand for the US dollar as a safe haven currency during the Eurozone crisis and capital outflows from India weakened the rupee. However, some experts believe a weak rupee could attract foreign investment funds seeking to benefit from rupee appreciation. Nonetheless, the fundamentals remain challenging for the rupee due to India's large trade deficits, debt repayments, and volatility in global financial markets.
Franklin Templeton Quarterly Report -Debt Market - August 2012Natraj71
This document discusses the fixed income markets and FT funds. It provides an overview of the global and Indian macroeconomic environment, noting accommodative monetary policies, slowing growth, and high interest rate differentials. It then summarizes FT's fixed income funds, including the Templeton India Low Duration Fund, Short Term Income Plan, Income Opportunities Fund, and Corporate Bond Opportunities Fund. These funds are well positioned for the current environment given their focus on short-dated securities and corporate bonds.
This document discusses the growth of retail finance in India. It notes that retail banking has expanded its scope and become a prominent part of bank balance sheets. Banks now offer a wide range of loan products to retail customers. Housing loans and auto loans have seen particularly strong growth. Overall, retail advances for banks grew 41.2% in 2004-05. Retail finance is seen as having significant potential for further expansion given India's growing middle class and low existing penetration rates. However, regulators have expressed some concerns about the rapid growth rates in certain retail segments like housing.
The file highlights the importance of the macro-economics related to a country's budget. Lot of guidance has been taken from www.mrunal.org where the concepts have been very lucidly explained.
Reducing Rupee - The Great DepreciationKushalShah165
In this article I’ve laid out the timeline and a few top indicators responsible for it and described it in it’s simplest forms for everyone to understand.
Hope you enjoy the read.
The document provides an economic update and outlook for India. It notes that India's GDP growth was estimated at 4.8% for the last quarter, slightly higher than the previous quarter's revised rate of 4.7% but still below 5%. Industrial production grew by only 1.0% for the full fiscal year. Inflation rates have fallen, with WPI hitting a 41-month low of 4.89% in April. The RBI recently cut interest rates, citing lower inflation and slowing growth. However, the economic growth outlook remains cautious as investment activity remains subdued.
Non-performing assets (NPAs) in the Indian banking system have significantly increased in recent years. NPAs totaled around 2.5 lakh crores (approximately $37 billion) by the end of March 2015, equal to the budget of the state of Uttar Pradesh. State-run banks account for two-thirds of total loans but 80% of bad assets. Rising NPAs hurt bank profitability, constrain new lending, and undermine public confidence in the banking system if left unaddressed. The majority of the increased NPAs have occurred in public sector banks that extensively lent to corporates between the early 2000s and 2008; many of these companies subsequently struggled amid a global slowdown.
This document provides an overview of Bank of Baroda, including its business segments, financial performance, and risk management approaches. It summarizes that Bank of Baroda is the 3rd largest public sector bank in India with over 3000 branches and total assets exceeding Rs. 2.27 lakh crore. It offers a wide range of banking products and follows the standardized approach for credit risk, basic indicator approach for operational risk, and duration-based approach for market risk under Basel 2 regulations. The document also compares Bank of Baroda's asset-liability management and risk-weighted assets to other major banks in India.
Repo Rate and It's effect on Indian EconomyAnirudh Daga
The document discusses the effects of repo rate changes on the Indian economy. It analyzes the relationship between repo rate and inflation, exchange rates, GDP growth, and fiscal deficit. The Reserve Bank of India uses repo rate as a monetary policy tool to control money supply and influence these economic factors. The analysis finds that repo rate and inflation, exchange rates, and GDP are inversely related, while repo rate and fiscal deficit are positively related. It also examines how RBI has effectively used repo rate reductions to boost economic growth in India.
Overall domestic equity market outlook – marginally positive, expect benchmark indices to continue moving in a narrow range in near term
Currency outlook – Stable, expect INR to average 70-71 for the year
Rate outlook – expect more easing
The document discusses 12 principles for life and learning based on the movie 3 Idiots. The principles are: 1) Pursue excellence rather than success, 2) Live life to the fullest, 3) Following your passion leads to excellence, 4) Learning is simple and never stops, 5) Current education systems create too much pressure, 6) Life is about managing emotions not just intelligence, 7) Necessity creates invention, 8) Simplicity is important, 9) Leadership should allow flexibility, 10) Love is limitless, 11) Communication is powerful, and 12) Mediocrity should be avoided and one's potential realized. The overall message is to seek excellence and success will follow.
http://inarocket.com
Learn BEM fundamentals as fast as possible. What is BEM (Block, element, modifier), BEM syntax, how it works with a real example, etc.
How to Build a Dynamic Social Media PlanPost Planner
Stop guessing and wasting your time on networks and strategies that don’t work!
Join Rebekah Radice and Katie Lance to learn how to optimize your social networks, the best kept secrets for hot content, top time management tools, and much more!
Watch the replay here: bit.ly/socialmedia-plan
Lightning Talk #9: How UX and Data Storytelling Can Shape Policy by Mika Aldabaux singapore
How can we take UX and Data Storytelling out of the tech context and use them to change the way government behaves?
Showcasing the truth is the highest goal of data storytelling. Because the design of a chart can affect the interpretation of data in a major way, one must wield visual tools with care and deliberation. Using quantitative facts to evoke an emotional response is best achieved with the combination of UX and data storytelling.
The document discusses how personalization and dynamic content are becoming increasingly important on websites. It notes that 52% of marketers see content personalization as critical and 75% of consumers like it when brands personalize their content. However, personalization can create issues for search engine optimization as dynamic URLs and content are more difficult for search engines to index than static pages. The document provides tips for SEOs to help address these personalization and SEO challenges, such as using static URLs when possible and submitting accurate sitemaps.
This document summarizes a study of CEO succession events among the largest 100 U.S. corporations between 2005-2015. The study analyzed executives who were passed over for the CEO role ("succession losers") and their subsequent careers. It found that 74% of passed over executives left their companies, with 30% eventually becoming CEOs elsewhere. However, companies led by succession losers saw average stock price declines of 13% over 3 years, compared to gains for companies whose CEO selections remained unchanged. The findings suggest that boards generally identify the most qualified CEO candidates, though differences between internal and external hires complicate comparisons.
This presentation explains the reasons for the fall in the value of Indian Rupee, the cause and effect. Also what the government must do to curb the fall is included.
Latin America Risks And Opportunities - Jan 2012ibarraricardo
Key risks and opportunities in Latin America for 2012. This will include an overview of our global and regional views as well as our strategy for Financial Markets in Latin American & the Caribbean.
The Union Budget for 2012-13 focused on fiscal consolidation through tax measures and limiting subsidies while also emphasizing infrastructure development and inclusive growth. Key points include GDP growth projected at 6.9% for FY12 and 7.35-7.85% for FY13, increased spending on agriculture, education, and healthcare, and measures to attract investment into capital markets and infrastructure sectors. However, the lack of major reforms disappointed markets, which declined on the day of the budget.
The Indian rupee had its worst year in 2011 against the US dollar, dropping nearly 16% due to several domestic and global factors. Domestically, high inflation and increasing crude oil prices put pressure on the rupee. Globally, increased demand for the US dollar as a safe haven currency during the Eurozone crisis and capital outflows from India weakened the rupee. However, some experts believe a weak rupee could attract foreign investment funds seeking to benefit from rupee appreciation. Nonetheless, the fundamentals remain challenging for the rupee due to India's large trade deficits, debt repayments, and volatility in global financial markets.
Franklin Templeton Quarterly Report -Debt Market - August 2012Natraj71
This document discusses the fixed income markets and FT funds. It provides an overview of the global and Indian macroeconomic environment, noting accommodative monetary policies, slowing growth, and high interest rate differentials. It then summarizes FT's fixed income funds, including the Templeton India Low Duration Fund, Short Term Income Plan, Income Opportunities Fund, and Corporate Bond Opportunities Fund. These funds are well positioned for the current environment given their focus on short-dated securities and corporate bonds.
This document discusses the growth of retail finance in India. It notes that retail banking has expanded its scope and become a prominent part of bank balance sheets. Banks now offer a wide range of loan products to retail customers. Housing loans and auto loans have seen particularly strong growth. Overall, retail advances for banks grew 41.2% in 2004-05. Retail finance is seen as having significant potential for further expansion given India's growing middle class and low existing penetration rates. However, regulators have expressed some concerns about the rapid growth rates in certain retail segments like housing.
The file highlights the importance of the macro-economics related to a country's budget. Lot of guidance has been taken from www.mrunal.org where the concepts have been very lucidly explained.
Reducing Rupee - The Great DepreciationKushalShah165
In this article I’ve laid out the timeline and a few top indicators responsible for it and described it in it’s simplest forms for everyone to understand.
Hope you enjoy the read.
The document provides an economic update and outlook for India. It notes that India's GDP growth was estimated at 4.8% for the last quarter, slightly higher than the previous quarter's revised rate of 4.7% but still below 5%. Industrial production grew by only 1.0% for the full fiscal year. Inflation rates have fallen, with WPI hitting a 41-month low of 4.89% in April. The RBI recently cut interest rates, citing lower inflation and slowing growth. However, the economic growth outlook remains cautious as investment activity remains subdued.
Non-performing assets (NPAs) in the Indian banking system have significantly increased in recent years. NPAs totaled around 2.5 lakh crores (approximately $37 billion) by the end of March 2015, equal to the budget of the state of Uttar Pradesh. State-run banks account for two-thirds of total loans but 80% of bad assets. Rising NPAs hurt bank profitability, constrain new lending, and undermine public confidence in the banking system if left unaddressed. The majority of the increased NPAs have occurred in public sector banks that extensively lent to corporates between the early 2000s and 2008; many of these companies subsequently struggled amid a global slowdown.
This document provides an overview of Bank of Baroda, including its business segments, financial performance, and risk management approaches. It summarizes that Bank of Baroda is the 3rd largest public sector bank in India with over 3000 branches and total assets exceeding Rs. 2.27 lakh crore. It offers a wide range of banking products and follows the standardized approach for credit risk, basic indicator approach for operational risk, and duration-based approach for market risk under Basel 2 regulations. The document also compares Bank of Baroda's asset-liability management and risk-weighted assets to other major banks in India.
Repo Rate and It's effect on Indian EconomyAnirudh Daga
The document discusses the effects of repo rate changes on the Indian economy. It analyzes the relationship between repo rate and inflation, exchange rates, GDP growth, and fiscal deficit. The Reserve Bank of India uses repo rate as a monetary policy tool to control money supply and influence these economic factors. The analysis finds that repo rate and inflation, exchange rates, and GDP are inversely related, while repo rate and fiscal deficit are positively related. It also examines how RBI has effectively used repo rate reductions to boost economic growth in India.
Overall domestic equity market outlook – marginally positive, expect benchmark indices to continue moving in a narrow range in near term
Currency outlook – Stable, expect INR to average 70-71 for the year
Rate outlook – expect more easing
The libor game, global financial markets andYasha Singh
Robo Bank and its employees were involved in illegal activities related to manipulating LIBOR submission rates to benefit themselves financially. LIBOR manipulation impacted global markets in several ways. It negatively affected capital markets since LIBOR is a reference rate for many financial instruments. It also impacted currency exchange rates and inflation levels. Mortgage rates, student loan rates, and commodity prices were all influenced by shifts in LIBOR. In India specifically, LIBOR manipulation hampered capital markets since the MIBOR rate is set in reference to LIBOR. Additionally, fluctuations in the INR currency rate compared to the dollar and euro despite economic conditions could partially be attributed to manipulation of the LIBOR rate, which influences global currency markets.
It is well known fact that existing home loan customers are always discriminated in terms of interest rate. This will act as guideline for existing as well as prospective home loan borrowers.
- The RBI lowered interest rates last week but further cuts may be limited due to global and local factors like the US Federal Reserve's expected interest rate increases. If the Fed raises rates, emerging markets like India cannot lower rates aggressively.
- Monsoon rainfall is important but full effects won't be known until mid-June. Inflation expectations and weak economic data point to challenges for the equity market. Government capital expenditures will be key as corporate balance sheets limit private investment.
- Tactically, export sectors like IT and pharma that benefit from rupee weakness are preferred, while private banks offer long-term potential after declines and PSU banks are a value opportunity over 5 years.
How to Get the Indian Tiger to Roar AgainQNB Group
1) India's declining rupee and slowing economy require structural reforms to sustain growth according to QNB Group.
2) Short-term measures like interest rate hikes have backfired and structural reforms are needed to address India's unsustainable current account deficit and uncompetitive export sector.
3) QNB Group argues India needs another wave of economic liberalization similar to 1991 to restore competitiveness and bring about higher growth over the medium term.
Similar to Impact of S&P Negative Outlook (20)
1. Standard & Poor’s Negative Outlook
Impact on Indian Economy & Financial Markets
Group 2 MBF Mumbai Batch 13th May
1
2012
2. Sovereign Credit Rating – What is it ?
• Credit rating evaluates credit worthiness of debt issuer
• A Sovereign credit rating is rating of sovereign entity –
a national government
• Poor rating indicate high risk of defaulting
• It is not base on mathematical formulas.
• Credit Rating Agencies use their experience and
judgment
• Sovereign credit rating indicates risk level of investing
environment of a country
• Sovereign rating takes political risk into account
Group 2 MBF Mumbai Batch 13th May
2
2012
3. S&P Rating update
• BBB- (One notch above “ Junk”)
• Stable Outlook
• BBB- affirmed
• Negative Outlook – 33% Chance of
Downgrade
Group 2 MBF Mumbai Batch 13th May
3
2012
4. Where are we ?
Lowest Investment Category
AAA
AA
A
BBB
BBB- ( India)
BB
B ,CCC , CC, C
D ( Default)
Group 2 MBF Mumbai Batch 13th May
4
2012
5. S&P Global Rating
Standard & Poor's Foreign Rating in April 2012
Group 2 MBF Mumbai Batch 13th May
5
2012
6. Where are we ?
Lowest Rating in BRIC
Group 2 MBF Mumbai Batch 13th May
6
2012
7. Negative Outlook- Rational
• High Fiscal Deficit
– Target for 2012-13 5.1% of GDP
– 2011-12 was 5.9 % very high against target of 4.6%
• High Current a/c deficit
– 3.7% of GDP in 2011-12
– 4.3% of GDP in Q3 2011-12 ( Highest since Balance of
payment crisis in1991)
• Lowest GDP Growth in last 3 Years
– 6.8% 2011-12 against 8.4% in 2010-11
Group 2 MBF Mumbai Batch 13th May
7
2012
8. Negative Outlook- Rational
• Slow pace of fiscal Consolidation
• Continued Inflationary pressure
• High Subsidy burden ( Fuel, Fertilizer)
• Governments policy reversal
– FDI in Multi brand Retail
• High Debt/GDP Ratio
Group 2 MBF Mumbai Batch 13th May
8
2012
9. Impact of Negative Outlook
• 1/3 Chance of Downgrade in next two years
• 60% of countries that see an outlook downgrade face a
ratings downgrade in 7 months
• If downgraded, India will be non investment
grade.
• Further depreciation of Indian Currency
• Overseas Borrowing will be difficult
Group 2 MBF Mumbai Batch 13th May
9
2012
10. Impact So Far ….
• Currency Depreciation
• Benchmark Index Down
• FII Net sale
• 10 Yrs Bond Yield Increased
– No Cool down despite of 50 Bps Cut by RBI
Group 2 MBF Mumbai Batch 13th May
10
2012
11. Impact So Far ….
15th April 11th May
1.03 NIFTY – 5207 4928
INR/Dollar – 51.42 53.64
1.02 RBI Reference Rate
1.01
1.00
0.99
0.98
INR/USD
0.97
Nifty
0.96
0.95
0.94
Group 2 MBF Mumbai Batch 13th May
11
2012
12. Impact So Far ….
FII Net Flow ( Equity+ Debt ) Source SEBI ( Rs in '000 Crores)
1.50
1.00
0.50
0.00
-0.50
-1.00
-1.50
-2.00
-2.50
23-Apr 24-Apr 25-Apr 26-Apr 27-Apr 30-Apr 2-May 3-May 4-May 7-May 8-May 9-May 10-May 11-May
Group 2 MBF Mumbai Batch 13th May
12
2012
13. Impact So Far ….
10 Year Bond Yield Since 10th April 2012
Source : www.bloomberg.com
No Impact of 50
Bps RateRate by RBI RBI
50 Bps Cut Cut by
Group 2 MBF Mumbai Batch 13th May
13
2012
14. Impact of S&P Rating Downgrade
• In Aug 2011, S&P cuts US Rating from
AAA to AA+
US Rating • One Notch down from Highest Safety
category
Downgrade • Dow plunges 634 points; NASDAQ, S&P
fall almost 7%
• No more Investment Category “Junk”
• FII’s Big sell off
If Downgrade • Capital Markets May hit lower circuits
India Rating • Increased bond Yield , Bond Prices fall
• Panic all around
Group 2 MBF Mumbai Batch 13th May
14
2012
15. State of Economic Dilemma
Limited Room for Increased
FII’s will avoid India
Policies borrowing costs
• Current A/c • Will dampen the • Lack of
Deficit interest in local confidence
• Weak Investment currency among FII’s
& Economic debt, which has • Weak global
Growth already investment
• High & Structural weakened on climate
Inflation + Fiscal other related • Policy
Deficit uncertainties paralysis, sticky
• Leaves No Room inflation and
for Policies slowing growth
Group 2 MBF Mumbai Batch 13th May
15
2012
16. State of Economic Dilemma
Further Depreciation Slows Economic Paralyzed
of Currency Growth Government
• FII’s Withdrawal of • Investor flows likely • UPA 2 is not
Funds ( net sell) to decrease facilitating
• High Oil import bill • not a favorable economic activity
• Further blend for investors , it is too busy fire-
depreciation in in India fighting scams
Currency will add • Downgrade creates • Has put off FII with
fuel to Inflation a vicious cycle recent Tax Polices
• Difficult to come • Post UP Election
out of it . Weakened
bargaining power
of Congress.
Group 2 MBF Mumbai Batch 13th May
16
2012
17. Can India Avoid Downgrade ?
Unstable
GDP Growth
Government
Group 2 MBF Mumbai Batch 13th May
17
2012
18. Can India Avoid Downgrade ?
• Negative Out look is Wakeup call , still much better then peers
• Strong growth prospect and young population
• Indonesia and Philippines gained in investment rating due to
improved performance (so can we)
• Take Stringent Policy Decision
• Cut Subsidy Bill in Fuel, Fertilizer, Social Programs NREG
• Relax FDI in Banking, Insurance & Pension, Retail, Aviation
• Fast Track Implementation of GST, DTC
• Boost Investor Sentiment, More FII inflow
• Easing Interest rates further boost sentiment in Business
• Eventually high GDP Growth trajectory.
Group 2 MBF Mumbai Batch 13th May
18
2012
19. Risks
• Biggest Risk to Indian Economy is absence of Political
Consensus
• Implementation of key polices
• Opposition to reduce diesel subsidy, reversal of gold
duty, retro tax provision, GST rollback, FDI in retail rollback
• Un due Political Pressure from coalition parties.
Group 2 MBF Mumbai Batch 13th May
19
2012
20. S&P – Can we trust?
• Every Major crisis has been missed by the rating
agencies and in aftermath of every crisis they have
been very quick to downgrade – Montek singh
Ahluwalia deputy chairman PMEAC
• Assigned high rating to Latin America in 1980’s
especially at time when they were going bust
• They had positive rating for Asian economics when
they were going bust in 1997-98
• Euro crises – no downgrade
• They had not downgraded US in 2008 sub-prime crises
• They had not downgraded Lehman Brothers in 2008.
Group 2 MBF Mumbai Batch 13th May
20
2012
21. Various responses on Outlook revision
• No Need to Panic government is committed to economic reforms, it
should be taken as timely Warning – Pranab Mukhrejee Finance Minster
• Government should see this as a wake up call and address these issues –
CLSA Singapore
• Some concerns expressed by S&P will be resolved during the year. I would
expect S&P to reverse and perhaps upgrade rather than downgrade –
C Rangrajan PMEAC chairman
• A downgrade is likely if the economic growth prospects dim, external
position deteriorates, political climate worsen or fiscal reforms slow.-
Ogawa S&P
Group 2 MBF Mumbai Batch 13th May
21
2012