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Buoyant Indian Financial Markets

Despite vanishing FIIs, the Indian markets remain resilient and staying afloat .The UScrisis has significantly affected the investors sentiments. There will be substantial capitalout flows owing to investors tendency to with-draw from risky markets. This would leadto liquidity crunch that will, in turn, put pressure on the Indian bourse.

Currently the Indian economy is reeling under high inflation and a moderate growth rate.The Indian economy continues to show good health because of the strength of itsdomestic drivers, like infrastructure projects, SME sector exports and good yielding fromagriculture sector. India is now in a position to supply the food grains to U.S.A.

The siphoning of funds by FII is restricted in India by the SEBI regulations from 2008January on wards, helped India to stay afloat in this stock market crisis. The FIIs usuallyplay their game through Participatory notes (P notes) when ever they feel the Indianmarkets are risky they with in no time with draw huge quantities of funds from Indian

stock markets and it effects the debacle of Bourses and causes panic among theDomestive investors .

The globalization of stock markets & financial markets has the retrospective effect on themarkets from Tokyo to Newark with in a span of 24 hours. But once risk aversionsubsides, foreign funds would re-enter India. This would depend on how soon thedomestic market fundamentals regain momentum.

Ever since the US investment banking gaint Lehman Brothers filed for bankruptcy,there has been a considerable out flow of FIIs money from Indian stock markets. OnSeptember 15, the out flow stood at Rs. 856.4 crore. It further increased to Rs 1,333.5

crore on September 18, sensex lost 470 points and Nifty shed 155 points on the day ofLehman filed for Bankruptcy . The Bank index dipped 3.3 percent, Realty index lost 7.65percent, and IT index closed 5.5 down on the same day.

The cause behind US economy debacle is, the US investment banks are extremely over-leveraged and solely dependent on whole sale finances. This led to their demise. But suchis not the case with Indian Banks. The common mans deposits are more in India and theyhave the trust on the Banks, because all most all the Banks are nationalized and thedepositors interest is highly protected by Government of India.

But where as in US the investment Banks are dependent on institutional investors funds.

These investments are highly volatile and always search for high returns on their depositsand their way of depositing is Demand based and not Time based. That means when everthey feel the return on their investments are dipping with in no time, with draw fundsfrom such markets and re-invest in Better markets or take defensive positions, until themarkets regains its strength.

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The Lehman brothers debacle was raised from SUBPRIME episode at US. The subprime caused great loss to US economy in the previous year and the bad effects ofSUBPRIME showed their impact now on the Investment baking in US.

The US Government knows it before hand and predicted the collapse of markets in near

future by SUBPRIME. The US senate had a plan of buy-outs &Bail-outs in the time ofcrises to stabilize the US economy. The stunt, in the US senate about Bailout of theLehman Brothers and other institutional investing Banks was already rehearsed and wellplayed on the stage.

All the investors through out the world viewed this spectacular thriller with hair rising.The US senate under the leader ship of George Bush put an end to the financial crisissince the great depression of 1929.

Predictably, India like any other country is experiencing the repercussions of financialmess in the world largest economy. The Reserve Bank of Indian came with a package of

Rs.20, 000 crore to Bailout Indian financial institutions and strengthen the stock marketsentiments.

All the Domestic markets around the world will remain under pressure till the details ofthe $800 billion Bail out program announced by the US government come out. The bankrupee of Lehman Brothers has brought an end to the exclusive investment Banking era.Now it is the time for an integration of commercial and investment Banking.

One thing we debate on the degree of government involvement in the capital markets,because government is going to spend the taxpayers money to stabilize on Bailout thestock markets. The stock market is just like a gamblers casino played by the speculators.

The Government receiving revenues from the stock market operations. It created a Bullycalled SEBI to restrict and regulate the markets. The Government of India it self promoted NSE. India is the first country to adopt digitalized computer networks forestablishing the stock market business though out India by allotting online sub-brokers.Where as still US is following out cry method for purchasing and selling the stocks.

The NSE Advertising suggests to the house wives, that stock markets are just like homekitchens and you can cook a delicious meal with all the ingredients available at thekitchen.

The Government of India prohibited all the horse races, money lotteries, casinos andother waging activities in India. The stock markets come under exact definitions ofwaging activities, even though GOI promoting and regulating the stock markets throughSEBI. For the time immemorial the Indian economy solely depend on Agriculture exports& Hand loom exports. The GOI should take effective action program to promote theenterpremual skills among the Indian youth than investing at stock markets. Forstrengthening of Indian economy, the GOI should emphasize on long term benefits ratherthan short term profits.

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For effective utilization of Indian Youth, the GOI can promote various programs toencourage the SMEs with easy credit facilities and educate them with industrial trainingto start venture and promote healthier markets to export. It should extend all the supportin developing the growth of SMEs.

If huge investments diverted to fundamentally strong sectors like manufacturing andservices, the Indian economy cannot be rattled by any stock market debacle in the future.We should be in position to protect our economy by growing self sufficient in all aspects.