Us downgrade

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Us downgrade

  1. 1. US Downgrade
  2. 2. CONTENT Factors for US Downgrade Prospects for Developing Countries Impact on India
  3. 3. MAJOR FACTORS FOR US DOWNGRADE Debt ceiling  Limit set by US congress on the amount of debt the government can borrow. High fiscal account deficit  In 2011 federal budget, the US government estimated the expenditure at $3.82 trillion and revenues at something more than $2 trillion U.S. political problems  To approve the debt ceiling both democrats and the republicans agreed on consensus. S&P cut down the rating from AAA to AA+
  4. 4. PROSPECTS FOR THE DEVELOPING COUNTRIESIN THE LIGHT OF DOWNGRADE The world economy continues to recover from the global crises It would take 4-5 years before employment is back at pre-crisis levels in developed countries Food supply growth fell short More and more countries are expected to further unwind both monetary and fiscal support measures Fiscal policy needs to be redesigned
  5. 5. IMPACT ON INDIA IMPACT OF US DOWNGRADE  India is likely to witness volatility over the next few days and the market may trade lower. It is expected a 5-7% downward impact on the domestic market. OUTLOOK FOR INDIA  India will outperform on downside, it is expected next year to be very good, as rates will peak and inflation will ease. There may be even 20- 25% returns. ON DEFENSIVES  Valuations in defensive stocks are too high. ON INFRASTRUCTURE  Infrastructure stocks are waiting for interest rates to peak. After that, you can start buying. But they will do well in the next two year. ON INFORMATION TECHNOLOGY  IT is one sector where historically large-caps have broadly delivered. the IT industry is doing well in 9-12 months.
  6. 6. CONCLUSION U.S the strongest economy on verge of economic crisis Adverse effect on share market Fear of double dip recession materialising Downgrade in U.S affecting European nations

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