Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Credit crisis, Indian rupee & more... - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Mar 18, 2008

    Credit crisis, Indian rupee & more...

    • With increasing weakness and turmoil afflicting the Indian stock market last week, the scenario at the start of this week has been no different. Monday was witness to yet another day of slump on the bourses and the reason for this was unsurprisingly attributed to the slowdown in the US and the escalating impact of the subprime crisis. The latest development has been that of JP Morgan & Chase offering to buy one of Wall Street's top investment banking firms Bear Stearns. In fact, Bear Stearns was one of the first to be impacted by the subprime fiasco, when two of its hedge funds collapsed triggering signs of a credit crunch with other major banks reporting huge losses as well. As per reports, JP Morgan has put forth a price of US$ 2 per share, which is considered to be a mere fraction of what Bear Stearns was once worth. The Federal Reserve has provided a funding of US$ 30 bn and has cut the discount rate by 0.25%. Further, it is expected that it would cut the benchmark interest rate in its monetary policy meeting today.

      The fact that the Fed has been frantically taking steps to infuse life into the crippled financial system speaks volumes of the deepening of the credit crisis. To compound this problem, a weakening dollar and rising energy and food prices are keeping Americans and along with them the rest of the world on their toes. Asian markets including India are mirroring the trends in the US and European markets and while there rages a debate regarding 'decoupling', the fact remains that those Asian economies including India, wherein FIIs have poured in bountiful sums of money, are now facing the heat as these very FIIs are pulling out from emerging markets to protect their losses in the US.

    • The Indian rupee has depreciated from the Rs 39.25 levels it had reached at the start of the year against the US dollar despite the latter sliding against other major currencies of the world. This could be attributed to the flight of FII money from the Indian stockmarkets against the backdrop of an unfolding global credit crisis. In the month of March 2008 alone, FIIs have sold equities to the tune of US$ 746 m. It must be noted that the sharp appreciation of the rupee against the dollar since last year was influenced not only by the weakening dollar but also by the surge of FII money into the Indian stockmarkets on the back of the promise of 'India growth story' and the RBI choosing to stay on the sidelines and not intervening in the forex market to curb rising inflation. With the inflation now touching 5%, the Indian stockmarkets struggling to grope for direction and crude prices touching new highs, the rupee seems to be bogged down by downward pressure. That said, a consistently slumping dollar might cap any sharp depreciation of the rupee going forward.

    • Demerger of R&D, settling patent suits and focus on CRAMS are the three themes that have been making news as far as the Indian pharma companies are concerned in recent times. The increasingly competitive environment in the US and some of the European generics markets has prompted all these three business initiatives. The aim behind the R&D demerger is to enable the separately listed R&D company to avail of funding either through out-licensing route or through private funds, thereby paving the way for the main company to cut costs and improve margins. Settling patent suits is proving to be an effective tool in curbing the uncertainty associated with the outcome of the court cases and guarantees the challenging generics company some semblance of visibility in terms of revenues and also curtail rising legal costs. India's low cost advantage, superior process and chemistry skills along with better stability in revenues from this model as compared to generics have brought CRAMS players into the limelight in recent years.

      Having said that, tough pricing conditions in the US and some of European markets do not mean that one can write off the generics sector as the fundamentals (an ageing population, pressure on the government to reduce healthcare costs and more drugs losing patent expiries) continue to remain strong. Thus, the prescription for sustaining revenues and profitability in the generics market is cost competitiveness, niche products focus, widening geographical reach, continuous product flow and consolidation, the latter at reasonable valuations of course.



    Equitymaster requests your view! Post a comment on "Credit crisis, Indian rupee & more...". Click here!


    More Views on News

    How to Ride Alongside India's Best Fund Managers (The 5 Minute Wrapup)

    Jun 10, 2017

    Forty Indian investing gurus, as worthy of imitation as the legendary Peter Lynch, can help you get rich in the stock market.

    Dear PM Modi, India is Already Land of Self-Employed, and It Ain't Working (Vivek Kaul's Diary)

    Aug 21, 2017

    Most Indians who cannot find jobs, look at becoming self-employed.

    The Key Factor Pushing Gold Up These Days (Outside View)

    Aug 21, 2017

    PersonalFN explains the chief factor pushing gold prices up of late.

    How Unique Are the Companies You Invest In? (The 5 Minute Wrapup)

    Aug 21, 2017

    One of the hallmarks of successful investing is to look out for companies that have a unique and enduring moat.

    You've Heard of Timeless Books... Ever Heard of Timeless Stocks? (The 5 Minute Wrapup)

    Aug 19, 2017

    Ever heard of Lindy Effect? Find out how you can use it to pick timeless stocks.

    More Views on News

    Most Popular

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    The Most Profitable Investment in the History of the World(Vivek Kaul's Diary)

    Aug 8, 2017

    'Yes, it looks like a bubble. And, yes, it's like buying a lottery ticket. But there's something happening that has never happened before. It's an evolutionary leap in money itself.'

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    Bitcoin Continues Stellar Rise(Chart Of The Day)

    Aug 10, 2017

    Bitcoin hits an all-time high, is there more upside left?

    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms


    Aug 21, 2017 (Close)