Obama fears India's rise. Here's why.
In this issue:
» What makes Obama fearful of India's rise
» RBI hikes CRR by 0.75%
» Auto sector to remain robust
» US Fed Chairman Bernanke gets second term
» ...and more!!
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The key takeaway for us here in India is his statement, "To encourage ... businesses to stay within our borders, it is time to finally slash the tax breaks for companies that ship our jobs overseas, and give those tax breaks to companies that create jobs right here in the United States of America." That clearly has implications for the Indian IT industry. Little wonder then, the top losers among the index heavyweights in India today were from the software pack. So far, the mood among the Indian software giants seems optimistic. US tax breaks aside, American companies will continue to need cost effective services. The key question is whether Indian service providers can remain competitive even after taking into account the higher taxes their clients must pay. In our view, Indian IT companies will still get business. They continue to provide compelling value. They have also taken steps like increasing their presence overseas and hiring locals there.
On a broader note, Obama also noted that countries like India were "not standing still... They are putting more emphasis on math and science. They're rebuilding their infrastructure. They're making serious investments in clear energy because they want those jobs." In our view, this is an admission of the progress we have made in the past several years. There is no mistaking that we have years of catching up to do. But we can take heart that things are moving in the right direction.
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Chart of the day |
Source: Wall Street Journal
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So, with a robust growth in volumes, is the performance on the stock markets expected to follow suit? We do not think so. For one, the fight for market share is going to intensify, thus affecting profitability and secondly, the stock prices have run up to such an extent that the upside in volumes seem to be already reflected in the share prices. So, while Main Street will continue to chug along nicely as far as the auto sector is concerned, Dalal Street may just not follow suit.
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Well, we are in the midst of something similar currently. Markets have been seeing red for the past week or so. Investors have gotten shaken. Some small IPOs that were unfortunate enough to have opened during this time are now falling flat on their face. As per a leading business daily, the Rs 1.5 bn Aqua Logistics IPO that closed yesterday has been subscribed only 40%. Others like Thangamayil Jewellery , Syncom Healthcare and Vascon Engineers too are seeing a pathetic response. Everything said and done, the wise investor realizes that the odds are stacked against him in an IPO. In short, with 4,000 plus companies already listed on the exchanges, it indeed makes little sense to play the unfavourable IPO game.
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So there you are. Ben Bernanke, the Chairman of the US Federal Reserve, has been confirmed for a second term by the US Congress. This vindicates the stand taken by his supporters. They thought that the US economy was badly injured during the crisis and required radical surgery. Hence, it made no sense to change the surgeon now that the patient was starting to recover.
With Bernanke back in the hot seat, and for the next four years, it would be interesting to see how he acts to sustain growth for the US economy. After all, now is the time that he and his team would need to begin reversing a record monetary expansion. And this without undercutting the fledgling recovery in the world's biggest economy.
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Today's investing mantra |
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12 Responses to "Obama fears India's rise. Here's why."
SHAHULHAMEED
Jan 29, 2010If Indian IT companies focus their attention to increase their business shares across the globe, eventually the dependence on US will start diminishing.
Overall Indian story is based strong fundamentals, very strong RBI controls. We will outshine China and even US in the long run. Obama is admittadly accepting the fact that Indian is catching up. Let the business people take the lead, leave the politician behind, they have other agenda to appease vote banks. We need the likes of Ratan Tata, Ambani, Anand Mahindra, Lakshmi Mittal to lead the business empire. Indian business leaders are par excellence in comparison to thier counterparts elsewhere. Govt of India with absolute majority can implement several growth oriented policies without any problem. We must progress come wahtever may be.
You cant have our senior ministers indulging in other activities such as cricket board. They must relinquish such job when they become cabinet ministers. Sharad Pawar has no time to run the agriculture ministry.
Anish
Jan 29, 20105 minutes equity wrap ups are just awesome. In
nutshell it explains everything. Very Fair. I am fully
in-line with the contents.
And I just loved the legend Warren Buffet quote.
Being rational is the key when investing.