Niveshak January Issue

Tuesday, January 20, 2009 , Posted by Team Niveshak at Tuesday, January 20, 2009

On behalf of IIM Shillong, we wish all our readers a very Happy New Year and hope we see the Bull running wild on the markets very soon. 

The ghost of the sub-prime has not yet passed; the bear is still at large at the markets. Stock prices fight each other in defeating historic lows. Government of India has again revised estimated GDP growth projections taking it a notch below. Negative corporate quarterly results put the sensex on a slippery slope, but India Inc has more has more to worry about. This time the image of India Inc has been tarnished by the Satyam’s disgraced ex-chief Mr. B Ramalinga Raju, once hailed as the blue eyed boy of India Inc. Merger talks & bailout pleads take most of the news space. Apart from negative financial data across the globe grabbing headlines, Mr Barack Obama brings in some cheer and hope for change to viewers by taking over the Presidentship
of the United States of America.

In this edition we have tried not to talk about sub-prime crisis much. Since this is the first issue of this year, we would try to look at the blunders we committed in 2008 in the world of finance and try not to repeat them in future. We shall also try to take a historic look at Great Depression of 1929 and draw parallels with the current crisis. We have important lessons to learn from the failure of Bear Stearns, a sub-prime hit bank that had to shed its I-Bank glamour, swallow its pride and sell itself to JP Morgan Chase, a less glittery but huge commercial bank. One of the most complicated financial instruments-the Credit Default Swaps has also been extensively covered.

We shall discuss one of the most elusive topics - the pricing of CDS by some globally accepted methods. The regime of regulated oil prices in India has always troubled oil companies and they had to often take support of oil bonds to see the light of another day. Last few years of stratospheric crude oil rates has further endangered their existence. We shall analyze if they can ever end up in green. As the catastrophe of Wall Street has hammered valuations across world stock markets to unimaginable lows, certain corporate have started to stroll between the ruins and pick stocks of rival companies at throwaway prices. To fend such a type of acquisition, India Inc has finally arisen to Differential Voting Rights. This issue carries an article on DVRs. This volatility of stock market indices has also prompted some analysts to question if these indices are
representative enough of the world business outlook. May be we have an alternative in the Baltic Dry Index that is only dependent on fundamentals and not much on sentiments.

Talking about Sub-prime, historically low stock prices, acquisition of shares, bankruptcy of banks, we remember that Sovereign Wealth Funds acquired major chunks of shares of wall street behemoths like Merrill Lynch, Morgan Stanley, Bear Stearns, Citigroup, UBS, London Stock Exchange among many other corporate which are regarded as America’s pride. These funds are swelling with cash and are always hungry for shares of huge western companies, but have faced severe opposition from governments of the countries where they targeted strategic acquisitions. What are these funds, how big are they, who owns them and why are they being opposed? We will try to answer.

Still you found lots of sub-prime talks. Well there is no way out of it as of now.

Happy Reading.

Team Niveshak

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