I was wondering that the entire financial turmoil started in US but its Indian stock markets that have fallen more; what could be the reasons; well i have tried to put in some points to ponder.
1. Indian stocks were over-valued. The P/E had climbed up in 2007 from 25 to 35 (2007 companies) which was not justified by the performance of the corporate sector.
2.Margins under pressure: In the quarter ending September 08 earnings declined 34 per cent although sales increased 38 per cent.
3. Selling pressure by FIIs as their investments were in toxic securities - by the way - they are the root cause of the problems. While Indian banks don't have any investments in these they are indirectly impacted.
4. funds were diverted from shares and even small savings schemes to bank deposits following the increase in the rate of interest. The growth of bank deposits which was 15 per cent at the beginning of the year rose to 20 per cent by the middle of September. Debt became far more attractive than equity
1. Indian stocks were over-valued. The P/E had climbed up in 2007 from 25 to 35 (2007 companies) which was not justified by the performance of the corporate sector.
2.Margins under pressure: In the quarter ending September 08 earnings declined 34 per cent although sales increased 38 per cent.
3. Selling pressure by FIIs as their investments were in toxic securities - by the way - they are the root cause of the problems. While Indian banks don't have any investments in these they are indirectly impacted.
4. funds were diverted from shares and even small savings schemes to bank deposits following the increase in the rate of interest. The growth of bank deposits which was 15 per cent at the beginning of the year rose to 20 per cent by the middle of September. Debt became far more attractive than equity
Comments
Good article, I would love to read more posts from you.
Roopa