Dear Niveshaks,

The current financial crisis has illustrated how the world markets have moved closer to each other and have become so interconnected that every move in every economy is now being catapulted to the global arena. Every piece of information is being analysed for signs of economic conditions. In fact, if we go by what is being written in press, right from high inflation, dismal growth numbers, hiring freeze and poor earning guidance by corporates, we can fall into a false sense of belief that our economy is already in midst of a recession. The Indian economy today is seen as so interconnected and dependent on the western economy that any problem in the western economy is automatically seen as trouble for the Indian economy as well.

However, if we analyse the situation carefully, the Indian economy is surely slowing down, but is not in the same mess as developed economies. The Reserve Bank of India has forecast a GDP growth rate of 7.7 per cent in FY 2011 while the UNCTAD has pegged the figure a shade lower at 7.6 per cent and the broad consensus among most economists is that it is unlikely to be lower than 7 per cent. Four years ago, if anyone had said the country would grow at 7 per cent, we would have taken it with glee, but three years of 9 per cent growth and talk of touching double-digit expansion had spoilt us. The fact of the matter, that Indian growth story is still intact and what we are seeing now is probably only a temporary phenomenon. The inflation rate is declining; overall domestic demand is growing, though not at the feverish pace of the last five years and jobs are being created, albeit at a slower pace than before though cost pressures have increased. Under the circumstances, the mood of despondency that has set in is unwarranted.

The currency space around us is on the verge of major transformation. The last time something big happened in currency space was in 1971, when the gold standard was abandoned by the then US President Richard Nixon. The move resulted in huge trade imbalances and a massive build-up of foreign currency reserves by countries like China. Something big is all set to happen again in the currency space with the new proposed currency bill by US. The bill is essentially a form of trade protectionism that intends to penalize China for keeping its currency at artificially low levels to boost its exports. The bill not only in violates a series WTO rules, but would also potentially dampen the global economic activity and increase the probability of a double dip recession.

This issue brings to you some more interesting and insightful topics. The cover story this month focuses on the Occupy Wall Street Protest and its implications for the US as well as global economy. The issue also features an article on the Private Equity Industry in India and the road ahead for it. Other articles in this issue focus on infrastructure financing and entry of private players in the Indian banking sector. The Classroom this month explains various types of Fixed Income Securities. We would like to thank all those who have contributed articles to this issue and sent entries for Fin Q.

Hope you find this issue an interesting read.

Stay invested.

Rajat Sethia

Dear Niveshaks,
As the Stock markets rallied in the later part of Samvat 2065 to kiss the 17000 mark on Sensex, the new financial year Samvat 2066 opened on a high note pushing both our benchmark indices BSE Sensex and NSE Nifty to 12 month highs. Hope this jubilation is a sign of things to come. With this hope and celebration in mind, we welcome you to Samvat 2066 and wish that we have a great year of Bull Run.
I still remember 6 months back, newspapers were full of negative economic and financial data from across the globe. Almost all the companies went into the negative income zone and had their shares trading at 12 months low. Countries were pushed to the recession and the brink of depression. Multinational Banks were writing off billions of dollars of bad debts quarter after quarter. We used to celebrate on even the slightest of any good news like any company coming out with positive quarterly earnings, but markets dint react much to such reports. Then we got reports on the whole of sectors recovering like positive IIP, then reports on recovery of whole of economies started to come. Most of these were intentionally created with forward statements to boost the morale of markets. Markets let some of these pass by and reacted heavily to others. We used to celebrate to all these.
But all of a sudden, today I feel that we are no longer searching for positive financial data on news sites. Market indices touching new highs every day has just become a part of the story. The same Banks and companies are making profits. M&A deals, which were either absent at that time or were forced by banks to help some companies survive, are returning with a bang. Have we matured or has this just been a part of life. We are now among reports that within the next two quarters, our financial markets will reach the levels that were prevalent just before the Sub Prime doom. We just hope that this current Bull Run prevails for at the least two more quarters’ so that we get the cheer & jubilation that once made the Wall Street and dalal street the most happening places of the world.
In the current edition we have a cover story on one of the most potent derivative instrument that was recently introduced in India- Currency Futures. Apart from this we have articles on Asset Management and allocation strategies, articles on the Bharti-MTN deal and the current state of Private Equity Industry of India. Hope this issue would prove to be an interesting read for you.

Stay Invested for the good times ahead.
Biswadeep Parida
(Editor-Niveshak)

Some events leave their mark on the history of finance and change the rules of the game forever. With stunning speed all the investments banks of Wall Street, the most formidable names in the world of finance, have faded into history. When Lehman Brothers suffered the ignominy of filing the biggest ever chapter-11 bankruptcy, Merrill Lynch disappeared into the embrace of Bank of America in a $50-billion stock deal ,Goldman Sachs and Morgan Stanley swallowed their pride to convert themselves into old-fashioned retail commer¬cial banks, the world watched with shock and horror as the Wall Street got completely wiped out of the species of its standalone I-Banks. Another I-Bank of Wall Street - Bear Stearns had already been sold out to JP Morgan Chase in February 2008. The world of high finance had been turned upside down. If this was not enough, AIG, the largest insurance company of USA got nationalized and Washington Mutual, the largest savings and loan institution and the fourth largest bank in USA was acquired cheaply by JP Morgan Chase in a flash.

These were no ordinary firms. They represented the pride of America’s financial system. They attracted the brightest from the top business schools. They were held up as models of good management, producing returns on eq¬uity that were the envy of their counterparts across all sectors. But suddenly, the Sub-Prime crisis taught them the basics of investment in the hard way.

Hounded by unforgiving investors and ruthless short sellers, they realised that their bets and investments made over the years have gone horribly wrong. For them, it’s now time to walk the long, less glittery road with a bunch of stodgy commercial bankers, who had to work a lot more to earn the same bo¬nus. It’s just not the end of an era or the demise of a lifestyle. It’s much more: It will not only change Wall Street forever, but could also see the Manhat¬tan elite slowly losing the reins of global finance to Asians and Europeans.

We analyse each of the failing financial institution, their global standing before the fail¬ure, their exposure to sub-prime debt, what went wrong, how they failed and what would be the possible implications on the world of finance.

Wall Street, they say, reinvents itself every few decades. This time round it’s not so much reinvention as disappearance. Some say Wall Street will never be the same again.Lets find out...

Team Niveshak