Manic Monday saw the US financial market downsliding to its worst tumble since 9/11 with three major financial tragedies: the bankruptcy of Lehman brothers, the sale of Merrill Lynch and the largest insurer AIG being downgraded by credit rating agencies.
How does India suffer from the US financial collapse? The US financial markets have direct co-relation with Indian banking systems, which means liquidity; growth rates, risk appetitie and ability to borrow in India will suffer. The business sentiments in India have already been low following the inflation but it has been further hit due to the global economic slowdown. The areas that will be affected are jobs, investment and corporate expansion plans. The three major sectors that have been hit are real estate, infrastructure and power, all three of being ambitious with their growth and expansion plans. Lehmann Brother, Merrill Lynch and AIG had stakes in these fields. ICICI bank stands to lose RS. 375 crores or 57 million pounds as the Lehman Brothers have filed for bankruptcy. The subsidiary of the ICICI bank had invested 57 million pounds in the bonds of Lehman brothers.
TATA AIG-running for protection cover
AIG which has suffered heavy losses has two types of insurances in tie-ups with Tata: general and life. Though the prices of the crude oil prices have dropped, but the rupee decline has not made any good. AIG has stated that they it would sell its assets to raise $20 billion but it does require additional funding. But it will be difficult because the entire world in general is going through a financial crisis
Global liquidity crunch in most likelihood will put stress on big ticket acquisitions. In this respect, Indian companies will look out for niche acquisitions or smaller companies for tie-ups depending on the strategy they make.
Another financial jolt to the Indian economy has been the state of the rupee which has ended at a two year low of 46.89 against the dollar for reasons of worries over asset flows from the equity markets in emerging economies. This means those companies which may have borrowed in dollar amounts will find it expensive to service the debt, with interest payments rising substantially, hitting their profitability in the process. The RBI will look at hiking the interest s of foreign currency deposits.
How does India suffer from the US financial collapse? The US financial markets have direct co-relation with Indian banking systems, which means liquidity; growth rates, risk appetitie and ability to borrow in India will suffer. The business sentiments in India have already been low following the inflation but it has been further hit due to the global economic slowdown. The areas that will be affected are jobs, investment and corporate expansion plans. The three major sectors that have been hit are real estate, infrastructure and power, all three of being ambitious with their growth and expansion plans. Lehmann Brother, Merrill Lynch and AIG had stakes in these fields. ICICI bank stands to lose RS. 375 crores or 57 million pounds as the Lehman Brothers have filed for bankruptcy. The subsidiary of the ICICI bank had invested 57 million pounds in the bonds of Lehman brothers.
TATA AIG-running for protection cover
AIG which has suffered heavy losses has two types of insurances in tie-ups with Tata: general and life. Though the prices of the crude oil prices have dropped, but the rupee decline has not made any good. AIG has stated that they it would sell its assets to raise $20 billion but it does require additional funding. But it will be difficult because the entire world in general is going through a financial crisis
Global liquidity crunch in most likelihood will put stress on big ticket acquisitions. In this respect, Indian companies will look out for niche acquisitions or smaller companies for tie-ups depending on the strategy they make.
Another financial jolt to the Indian economy has been the state of the rupee which has ended at a two year low of 46.89 against the dollar for reasons of worries over asset flows from the equity markets in emerging economies. This means those companies which may have borrowed in dollar amounts will find it expensive to service the debt, with interest payments rising substantially, hitting their profitability in the process. The RBI will look at hiking the interest s of foreign currency deposits.
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