Credit easing in the Indian Stock Market for Investments

“Definitely a good point to buy”: says chief economist at: NriInvestIndia.com

Markets rallied another 400 points, with massive buying seen in all major blue chip counters. The good part for the Indian economy is the fact that the Indian ADRs trading on NYSE and other US stock exchanges is witnessing some buying too. This clearly indicates that even the US investor believes in investing into the emerging economy like India.

NriInvestIndia.com a major global player for NRI Investments has seen a drop of almost 40% in their broking and mutual fund business in the past 5 months. However, the analysts out there firm that the momentum is picking up and the coming quarter would be of some good to the top brokerage houses, as the momentum is surely going to pick. The markets have come down to 10000 levels, which was much awaited and large majority of investors who has missed on to the previous bull run are now looking forward to catch these lows. Infact the NRI segment is also increasing their share of investment at these levels.

The inquiries to set up trading accounts for non resident Indians have also increased in the few weeks. The reason is simple that psychologically major part of the investing community was expecting the Indian market: bse (sensex) to trade at 10,000 and now that it is hovering around those levels, people and institutional investors are keen to buy in.

Yes, this is a right time to invest, but only for long term. The volatility has not gown down, but the good news is that the bailout plan is slowly working and the effect on the credit market is being witnessed. This would ease the capital flow in the credit market, giving more liquidity to the capital markets. Thus if one wants to place a bet, then this is a appropriate time, if no the correct time.

You cannot time the market, but you can certainly evaluate your risk to reward and on that basis you can make a choice which can reap you give benefits in a longer run. Thus one can plan to invest into India at these given levels. One of the best firms to make investments in India is: NriInvestIndia.com

Best time to Invest into Indian Stock Market

The markets were all about ups and downs in the gone week, with a final pickup that we saw on Friday. Yes the markets are down and beaten, trading below the long awaited 10,000 mark at the sensex (BSE: Bombay Stock Exchange). Analysts do believe that the buying can be seen coming at these levels, but the markets definitely miss the enthusiasm and zeal, that it wishes for. The oil is trading at its 6 month lows, commodity prices are trading lower, and the federal reserve is out with a solid $600 billion bailout plan too; then whats making the market sink day by day. This is one hard riddel to solve.

Many analysts believe that the major damage has been done and we are certainly at the bottoming out stage, all looks good now with inflation under control and the entire home mortgage bubble been taken control off; we can see some fresh buying coming into the markets very soon. On the flip side the good news is that no major banks or institutions are selling at any of the major stock exchanges, its just the lack of buying at counters: says “Karey Girish” at NriInvestIndia.com

The global economy is definitely suffering a lot, where we saw a lot of blood shed at major world stock markets like: china, japan, india, singapore, etc. The financial damage has been done, and this whole bailout will definitely bring some ease to the market, but such an effect would take some time to reflect on the market sentiment. The effect would be seen in the coming months, but nothing should be expected in a short term, say many bankers and economists.

However this could be a golden opportunity for those investors who missed on to the golden run of late 2006 and 2007. Investing in Indian stocks & mutual funds at these given levels could reap out some good long term returns, as the risk to reward is quite evident. The dowside is definitely less and on the other hand the upside is quite attractive, says a research analyst at: NriInvestIndia.com

RBI & SEBI action on the Indian Stock Market

RBI & SEBI action on the Indian Stock Market

  • The Reserve Bank of India on Monday evening (6th Oct) cut the cash reserve ratio by 50bp to 8.5%. The cut will come into effect from 11th October 2008 and is estimated to release about Rs20,000 cr into the system.
  • The last time RBI had cut CRR was in August 2003 and since then it has been continuously tightening.
  • Declining crude oil and other commodity prices and marginal decline in WPI gives some room to RBI to reduce CRR.

Reason for the cut

  • Liquidity has been tight for quite some time now with call rate (interbank rate) ruling in double digits, and banks borrowing from the RBI at 9% on an average of Rs 70,000 cr daily for past three weeks.
  • Liquidity crunch has been affecting corporates as they had to borrow at much higher rate. This move will cushion Indian banks against the impact of global liquidity crisis.
  • Central banks around the world are trying to improve liquidity by injecting billions of dollars into the system. Even Fed is now expected to cut rate. In Australia, RBA has cut rate by 50-100 bps today to support growth. Even Bank of England is expected to follow suit before this weekend.

Implication

  • This will definitely bring relief and help cool the money market.
  • The move demonstrates RBI’s readiness and ability to move quickly and ahead of expectations to systemic problems
  • This will provide a boost to banks’ earnings as they would be able to transfer 0.5% of assets from zero-yielding deposits to loans yielding 10-11%.
  • This move definitely is a turning point in rate cycle. We belief interest rate has peaked but with inflation still much above RBI’s comfort level, there might not be any immediate benchmark rate cuts.
  • GDP growth is expected to moderate in FY09 and this move will not be enough to accelerate the growth.


SEBI eases PN curbs

  • On Monday (6th October), Sebi removed restrictions on issuing participatory notes (popularly known as P-notes) by FIIs, where the underlying asset is a stock or a derivative instrument listed on the Indian exchange.
  • It scrapped the rule which stipulated P-notes could account only for up to 40% of the value of assets held by a foreign fund.
  • The regulator has also decided to set up a committee to take a re-look at the whole FII trading process in the Indian market. (In October 2007, Sebi had imposed the curbs on p-notes to cool down markets and to calm a strengthening rupee by slowing money inflows).
  • Sebi also decided to enhance the limit of holding shares in a recognized stock exchange from 5% to 15% for six categories of shareholders: public financial institutions, stock exchanges, depositories, clearing corporations, banks and insurance companies.
  • Sebi also decided to encourage promotion of dedicated exchanges for securities issued by SMEs.

Reason for this move

  • Indian market has declined to a level below 12K yesterday on global cues. Foreign funds have sold Indian stocks worth a net $9.4 billion so far in 2008, compared to record inflows of $17.4 billion last year.
  • The rupee, on the other hand, slid to a over 5 1/2-year low to Rs.47.80 on Monday.
  • It is believed that removing the restriction will have a positive impact on market.

Bottomline

  • It is a very encouraging move and will have a long term positive impact on the market. But foreign funds may not start moving immediately into Indian market as the developed world is reeling under a worst financial crisis and a looming recession (or significant slowdown)

Inflation affects on NRI & Retail investment in Stock Markets of India?

In the vague of global crisis and added commodity index uptrend, there is a very less choice left in the hands of a common person when it comes to returns on his Indian investments. The question is whether the investor can reap out some returns or would lose his equity in the market. These questions have been killing us in the past few months, wherein we are unable to predict the trend of the market.

Rising gas prices, commodity upsurge, inflationary pressure and geo-political tension in gulf has added a fuel to the global turmoil by depreciating the common mans interest and confidence in the local capital markets. This is just not the end, as we see more and more banks & financial institutions getting bust, the entire faith in the financial markets is getting reduced from the investor’s point of view.

The good news is that the US has come up with $700 bn bailout plan, that focuses on providing liquidity to the capital markets by buying back NPAs – non performing assets from the financial giants, thus providing them abundant cash to properly meet their debts & risks at time. This would certainly add as a catalyst to the global economic growth, and lot of analysts believe that we might see a bull run coming into the markets in a few months time. On this note lot of economists and analysts are advising their clients to start investing, as they see the market bottoming out at these current levels.

One should have a proper investing plan and must diversify his investments into Indian mutual funds and direct stocks in a proper well balanced ratio. Today is the time to start investing not only into stocks but also to invest into top mutual funds of India, with a calculated approach where one can buy into some good funds with proper analysis and research. The investment can make some returns over a period of 3-5 years, but the investment view should be of long term and not short term.

Proper advising should be taken incase an NRI – non resident Indian intends to invest in India, as the investment opportunities are quite abundant here, thus proper financial advise is of utmost importance, if someone wants to make money in the Indian stock market.