Saturday, 27 September 2008

Should Indian markets follow American markets?

That is the question we ask ourselves today. Has business become so interrelated that a meltdown in one country leads to the same in another country? Is the Indian economy so entangled in the American Economy that the Sensex and Nifty should react to whatever happens to the Financial institutions in US?
Aren't Indian Financial Institutions better off than the Americans as of now? India does not have a sub-prime problem! It does not talk of falling consumer spending. We have higher inflation - meaning more money chasing less goods. banks are wary of providing loans as usual and in the last five years the Indian banking system has been cleaning up its act by reducing non-performing assets and shoring up capital adequacy ratio. This should lead us to a stronger financial system and not a weaker one. Indian Sup-prime market is full of "Prime" cooperative sector. these loans are not scrutinised and therefore not tradeable. These loans will always be held till maturity or default, whichever occurs first. The cooperative sector has nothing to do with the corporate sector or the organised banking sector. So, there is no threat of the same thing happening in India.The range for nifty remains to be between 3800 and 4300. expect some positive news on the nuke deal and thus expect a decent opening on Monday.

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