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Will Indian market cope up with Dubai crash?

Created by : Jyoti Rath, Sr. Associate, Barclays  | 11 27 2009 11:09:11 +0000
Industry : Equity Research/AnalyticsFunctional Area : Global Business(Strategy & Execution)
Keywords : indian market dubai crash
Activity:  435 views;  last activity : 07 06 2010 20:18:09 +0000

RISKY BUSINESS: Dubai government-owned holding company Dubai World manages the country

Highlights of the market crash :-

* The Amount invested in infrastructure is not going to yield returns any time soon and by the time the world markets climb out of the recession the infrastructure created may be of no use.
* Tourism is down, the real estate markets have crashed with investors still licking their wounds and repaying large borrowings for properties that have halved in value. Job security is also a big issue.
* Compounding the problem is the fact that Dubai has no oil revenue to speak of.

In this case, do you think India will be able to cope up with Dubai crash?

  
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I don't think some development in real estate in Dubai will have an impact on the Indian economy. In India, the housing, real estate sector and construction industry are all doing well.India is a very large economy. It's a resilient economy. This is confirmed by the increasing demand for construction materials, cement and steel. Indian markets have rallied more than 100% from the lows a year ago, mostly backed by news of recovery and not necessarily on fundamentals. This is why such news will have a negative impact on our markets and we will be dragged down. Indian property market is very robust and largely dominated by internal demand. So there will be no adverse impact on us. Our business and funding plans are on track.
It's one thing if property prices or share prices come down. That will affect only one section of people. But it is not going to affect the living conditions, employment conditions, real economic activity in those countries where we are employed.
By Jyoti Rath, Sr. Associate, Barclays  11 27 2009 11:39:41 +0000
 
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From a pure India perspective, the financial markets are impacted by the global sentiment. Certain sectors are also under pressure on account of their business in terms of realizing that the existing money lent or to be received from these geographies or to an extent of implications where the existing order book may not be implemented at the right time frame. It is difficult to find any particular sector with a substantial exposure to the geography which can have a grave impact on the business models or the financials of the companies. India continues to be a domestic consumption story although there are companies which have had a vision of expanding to newer geographies. However, in the overall international exposure, Dubai will have a relatively lesser presence and domestic investors need not be worried from an Indian market perspective. If the corporate debt default in Dubai turns into a sovereign default, there would be real economic issues, which may not only hit India but others also.
By Esha Johar, Risk Analyst, Irevna  11 27 2009 11:35:40 +0000
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Yes, the exposure of Indian banks (comparatively) is much lower. The Indian economy has outperformed other countries. 
By Sunil Thacker, Owner, Sunil Thacker  | 06 10 2010 20:09:55 +0000
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yeah as we knw indian economy is one of the strongest economy in the world....though dubai crisis would definetly effect the economies of all over d world bt .......india has enough capicity to cope up wit it...
By deepak kumar tawatia, MBA/PGDM student, accman institute of management  | 11 30 2009 08:41:44 +0000
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India is one of the best economies of the world. Though we have a secret fund of trillions hidden in some Swiss banks but Indian economy has not shown any sign of blackout in the ongoing recession. In case of Dubai, the big guns were busy creating a world of luxury and comfort. With the country in debt  the city was busy in window dressing. Today's fallout was not a sudden affair, but the temor was a long time affair. With Indians coming back to their grooves, Dubai was not buying out the story. The buz of Dubai being a land of the shoppers and its plans to capture the sea was making toungu e watering story in the whole world.  Indian connections with the showbiz industry and the construction industry was a known factor. But though both of this sectors will sail through , but the unemployed NRI's will be a force to make the economy go a bit shaky in some states  like Kerala. Otherwise they won't affect a huge boat called India.  Also,  Abu Dhabi will surely come to the rescue of its sibling.
By sanjay dey, Tax & accounting , Consultatnt  | 11 30 2009 08:22:46 +0000
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The direct exposure that Indian market has taken to Dubai is as follows:

Container terminals:  Full ownership of the in Chennai container terminal, Ownership of Kochi international container terminal, Majority stake in Nhava Sheva container terminal, Mumbai, Majority stake in Mundra international container terminal, Kandla, Majority stake in Visakhapatnam port , Andhra Pradesh, Expression of Interest in Kulpi port project near Kolkata

Tata Group Exposure:  JV with Tata Realty and Infrastructure, Venture Tata Strategic Management Group for consultancy outsourcing

Other Property deals:  JV with Bharat Hotels, A $12-billion realty project near Bangalore with DLF to house 7.5lac people 

There are many more, but these are what I have information about.  These would get a directly impacted as a result of the Dubai Crash.  Also the job security of about 50 lac Indians working in the Middle East is also shaky.  As Our Finance Minister quoted - “Over 43.2% of the population of Dubai comprises Indians. I don’t think that they will be severely impacted, but it has to be watched”, which simply means they would be impacted, but not very badly.  So it might take some time for these things to settle down.  But the Indian market, being a very resilient one, would recover and get normalized within very short period.
By Rijo Stephen Cletus, Business Analyst / Consultant for IT, Hospitals and Healthcare Sector  | 11 29 2009 03:36:30 +0000
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The global crisis of 2008 triggered the Dubai World, holding company of several subsidiaries and it never recovered from the blow, that is its position. The full impact is yet to be assessed, but estimated that Indian banks had investments there worth for about Rs. 6200-6800 crores, which comes about 0.3 percentage of the total turnover of Indian banks. To my knowledge Bank of Baroda is most effected, their investments are about 4000 crores.

Dubai world is the largest holding company in the world, spreading its wings over 100 cities all over world. They were involved in financial services, property investments, commodities exchange, private equity investments, hospitality and tourism etc. Moodys Investors Services cut their ratings of the several companies of the Dubai World.

The sun never sets on Dubai World, is its tagline and thats the dream city. Where lakhs of Indians living, is trying to salvage Dubai world. Dubai Government already cancelled 1500 work permits. Indian population in Dubai is about 42 percentage.

Only BOB is effected and that too 7-8 percantage of its total advanses and the manage ment is hopful of recovering thier investments, according to them there nothing over due right now, all other banks effected meegerly, in the circumstances I storngly believe that the Indian stock markets may not get effected much. 
By RAMANATHA PRABHU N, Chartered Accountant  | 12 01 2009 06:35:12 +0000
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I think the crash may not cause big panic since measures are in place in different countries to meet the situation everyone is facing now. Since this crash is little way into the big crash in US and elsehwere, there might be adequate reqourse available with faster deploybility to overcome the outcomes.
By Mathew Cherian, Research Associate/Analyst, Western Michigan University  | 11 29 2009 10:02:22 +0000
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