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Terror strikes again

Nov 29, 2008

There is still one more month to go before 2008 paves way for a new and hopefully better year, but it can be easily inferred that this year will go down in the annals of history as one riddled with disasters. The worst financial crisis since the Great Depression, global economic meltdown, floods, hurricanes, earthquakes and terrorist attacks, you name it and 2008 had it in ample measure. A year that has certainly left a deep scar on the minds of people. In fact in the last three months, troubles across the world had escalated to such an extent that every week there was a big development taking place. And the week gone by was no different.

The week began with the US Treasury agreeing to bailout the troubled financial behemoth Citigroup. Four straight quarters of losses totaling to US$ 20 bn weighed heavy on its stock price, which fell by 26% in a single day. With reports flying thick and fast that the bank may have to split up or merge itself with another bank, the government stepped in to prevent this conglomerate from toppling over. As per a note released by the US treasury, Citibank is set to be injected with US$ 20 bn of equity funding, making it yet another beneficiary of the TARP (Trouble Assets Relief Program). Further, the US Treasury and the Federal Deposit Insurance Corporation (FDIC) will provide protection against the possibility of unusually large losses on subprime loans of approximately US$ 306 bn to the bank, which will remain on Citigroup's balance sheet. As a fee for this arrangement, Citigroup will issue preferred shares to the Treasury and FDIC. The preferred shares will earn an 8% dividend for the US Treasury.

The other big development was the US Fed announcing an additional gargantuan bailout package of US$ 800 bn closely following on the heels of the first bailout package of US$ 750 bn. The second plan is seen as another attempt to drive down mortgage rates further so that lending activity gathers pace. If the initial signs are any indication, it seems to be having the desired impact as interest rates on 30-year-fixed mortgage rates in the US fell almost a full percentage point post the announcement.

Terrorists once again declared war on India's financial capital, Mumbai on Wednesday night in what could be termed as probably the biggest and horrendous attacks ever. The ordeal continued for two harrowing days and finally concluded today morning, when the operation at Mumbai's iconic hotel Taj Mahal was declared over.

Indian benchmark indices witnessed a volatile trading session during the week. The first two days of the week saw the indices close in the red despite its Asian peers ending in the positive as news of Citigroup being bailed out did nothing to soothe investor fears. However, the Sensex reacted positively to China's central bank slashing interest rates by the most in 11 years. With hopes that the Reserve Bank Of India (RBI) will also mirror China's moves, the Sensex closed 4% higher on Wednesday. Terror attacks in Mumbai resulted in the stock exchanges remaining shut on Thursday. With the crisis spilling over to the last day of the week, as was expected, the trading session was volatile before the benchmark indices managed to close marginally higher.

Source: Yahoo
Source: Yahoo finance
Source: Sebi

Movers and shakers during the week

COMPANY 21-Nov-0828-Nov-08Change52-wk High/LowChange from 52-wk High
Top gainers during the week (BSE-A Group)
Spice Communications 26 37 43.1%77 / 23-52.3%
KSK Energy 121 154 27.0% 0 / 0NA
Educomp Solutions 1,785 2,261 26.7%5,650 / 1,515-60.0%
United Sprits 700 846 20.9%2,160 / 606-60.8%
GTL Infra. 37 44 20.4%107 / 30-58.6%
Top losers during the week (BSE-A Group)
REI Agro Ltd. 955 539 -43.5%1,795 /3550.0%
Unitech 32 23 -27.5%547 / 22-95.8%
Bhushan Steel 537 395 -26.3%1,730 / 386-77.1%
Bajaj Holdings & Invst. 311 247 -20.6%1,144 / 241-78.4%
Gujrat Mineral Dev. 33 27 -20.0%275 / 26-90.3%
Source: Equitymaster

As reported on Bloomberg, crude prices settled at US$ 54 a barrel, rising by 9% this week, the biggest weekly gain since March 2007. Gold settled at US$ 819 an ounce. While the month saw gold rising by 14%, the most since September 1999, during the week the yellow metal rose 3%.

These are troubled times indeed. While the ordeal just got over today morning, many of us are still trying to come to grips with this horrific incident. But we are reminded of a Jewish wisdom folktale involving King Solomon. Reported on Wikipedia, it goes as follows:

"King Solomon once searched for a cure against depression. He assembled his wise men together. They meditated for a long time and gave him the following advice: Make yourself a ring and have thereon engraved the words "This too shall pass". The King carried out the advice. He had the ring made and wore it constantly. Every time he felt sad and depressed, he looked at the ring, where on his mood would change and he would feel cheerful" .

This too shall pass, dear reader!

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