Capital markets may rebound faster than anticipated: Deloitte
Short-term outlook less pessimistic in India.
--------------------------------------------------------------------------------
The downturn was experienced in declining industrial growth, double digit
inflation, and a depreciating rupee. The issue was not about a lack of credit
but about a liquidity trap and lack of confidence.
--------------------------------------------------------------------------------
V. Rishi Kumar
Hyderabad, Nov. 6 The Indian economy and capital markets are likely to rebound
much faster than most people anticipate, according to global consultancy firm,
Deloitte Haskins & Sells.
However, the consultancy notes that concerns about curbing inflation, improving
the financial flow, lowering lending rates and easing up capital flows would
engage the country's policy makers, said Mr Shanto Ghosh, Principal Economist,
Deloitte Haskins & Sells.
The short-term outlook is less pessimistic in India than other markets. The
capital markets could turn around within six to nine months.
General concerns
The recent moves by the Union Finance Minister, Mr P. Chidambaram, and
regulators will slowly sink in addressing general concerns.
Mr Ghosh told Business Line that sectors such as real estate and
infrastructure, manufacturing and information technology were already feeling
the heat due to the slowdown in the banking and financial services sector in
the US and other economies.
But what separates India from the rest was its economy that was largely
dependent on the domestic market unlike many other countries in the West, he
noted.
The downturn was experienced in declining industrial growth, double digit
inflation, a widening current account deficit, declining foreign exchange
reserves and a depreciating rupee.
The issue was not about a lack of credit but about a liquidity trap and lack of
confidence, he said.
Referring to the IT sector which was principally dependent on the US financial
services markets, Mr Ghosh said domestic firms continued to bag deals but had
been forced to change pricing strategies.
They would face pricing pressures. All the good that these firms were doing was
being negated by the rising rupee impacting other sectors.
Bank funding
"Funds have dried up, not because there is no liquidity.
"But banks and financial institutions have adopted a cautious approach to
lending. So funds from banks are hard to come by. The other option of overseas
funds too has come down," he said.
"Lastly, companies now are cautious with the capital markets. Some recent
developments like that of Suzlon, Hindalco and Tata Motors' bid to raise debt
bear a testimony to these issues.
"However, we believe that a reversal of this trend is likely soon," he said.
http://www.thehindubusinessline.com/2008/11/07/stories/2008110751690500.htm
"Some cause happiness wherever they go; others whenever they go."
- Oscar Wilde
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