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Dr Doom bearish on India - Views on News from Equitymaster
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  • Jun 18, 2009

    Dr Doom bearish on India

    That Dr Doom aka Nouriel Roubini is not seeing any 'green shoots' (a metaphor used to describe initial signs of economic recovery) has been largely publicized in the media in the past few weeks. However, for the first time in many months, he has expressed his views on the Indian economy and its stock market and sadly, it does not make for a very good reading. Speaking to leading business daily, Roubini was of the opinion that the Indian stock markets along with other emerging market equities may have run up too soon too fast and there is a potential asset bubble building here. Although he agrees that part of the reason the stocks have rallied is because of better fundamentals in these markets, but he also remains concerned about the easy-money situation which is pushing up asset prices sharply.

    Roubini also proffered his views on whether inflation because of money printing by most governments or a deflation because of rising unemployment and lower consumer spending is staring us in the face. He opined that while in the near term, the global economy will be gripped by a deflationary spiral, eventually all the money printing by the government will go into goods inflation, leading to runaway inflation. Hence, in the longer term, it will be the inflation that will act as dampener while the global economic growth will be beset with problems of deflation in the near term. Going by the man's track record, we better take his comments seriously.

    Obamaspeak hits US banking stocks
    Following the sell-off seen in the US markets yesterday, the Asian markets have opened today on a weak note, with most benchmark indices trading down in a range of 1-2%. This adds to the decline that was seen in these markets yesterday on the back of decline in commodity stocks. Today, the culprits seem to be banking and financial stocks given that in the US yesterday, President Obama proposed sweeping new 'rules of the road' for the country's financial system to bring it to task.

    Obama has in fact blamed the financial crisis on a culture of irresponsibility that had taken root from Wall Street to Washington to Main Street. The new regulations outlined by Obama's team are likely to give new powers to the US central bank and the Federal Reserve to oversee the country's banking and financial system or rather police the entire financial system for risky products.

    Infosys believes that the worst is over
    The past 18 months have probably been one of the toughest for the Indian IT industry as clients, especially in the North American region, have been cutting down their spending on account of the slowdown.

    However, the management of IT major Infosys expects the 'worst to be over'. As per Mr. Gopalakrishnan "Our clients are more confident about the current situation because they believe that we are at the bottom and it's highly unlikely that we see something unforeseen (such as bankruptcies and failures) in the future." As such, the company expects clients to increase spending going forward. He also did add that demand of outsourcing services, however, will take at least a year to recover.

    However, the company has stuck to its revenue estimate, which it lowered for the first time ever last year.



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    4 Responses to "Dr Doom bearish on India"


    Jun 19, 2009

    I think that I would agree with the views of Sanjay Goenka above.
    I shall not be surprised to learn a few months down the line that the FII flows into the Emerging Markets were a part of the TARP funds that are not being absorbed into the US economy,(2) as some of the beneficiaries of these funds desire to return the same back to the FED.The part (2)above i have gathered on reading the "wall street journal" etc.
    Now what happens when this move matures??



    Jun 18, 2009

    Their is some merit in what Dr Roubini is saying.It is a fact that our equity markets have run up too fast and too soon.
    The reason for the rise is the hope's on the gut feeling that the worst is behind us.Is this so and is it palpable?
    A little economic data of a slowdown in the jobless claims, pick up of housing market, flattening of the Industrial Production curve is interpreted to mean that the worst is behind us.
    The point to ponder is that does this data mean that the economy has begun to pull back or is it just a flattening of the growth curve.
    In our domestic space the clear mandate to the ruling coalition caused bullish sentiments to emerge which is a very natural response.Everyone expects a lot from the government....just short of the moon, as the rally indicates.
    The Government has it's limitations, something very natural and expected, and in the first budget may or may not be able to meet the aspirations built into the present levels.One of the main factors that will influence the budget is the ballooning fiscal deficit.
    What if the Budget falls short of the expectations? What if the global growth curve has just flattened, only to dip again?
    I feel that economic recovery should not be judged immediately when some encouraging data is coming forth.The recovery shall be visible in one or two quarters for sure.In the meantime we may keep a keen watch without being carried away with the bulls or the bears.


    sanjay goenka

    Jun 18, 2009

    the opinions can be broadly classified in two parts - one by the economists and others on par with them like Dr.Roubini who reflect the actual ground reality as prevailing now and likely in the near feature and the second part comprising of investment banks/brokerages/business channels who have their own motives/reasons to reinforce that recovery/green shoots are more likely than any thing else


    Dr S Karthkeyan

    Jun 18, 2009

    I read the interiew and he is not only bearish on India but on the world. Ofcourse his predictions came true in the fall. But the same may not be the case in recovery - simply like 1+1 = 2. The pumping of money can only be done by the federal banks which has 50 % effect in reality. It is like a person who fell sick and taking medicine for recovery. The recovery as per medical science may take x number of days. The courage the patient (citizen) and the physical condition of the body(country) may lead to recovery at 50 % of x days. The 1+1 = 2 equation may not work here. Let us wait and revisit this subject.

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