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Capital Markets

 
Started by : Gandhi Rajan, Sr. Associate, ICICI Securities   10 27 2008 15:01:48 +0000
Industry : Investment BankingFunctional Area : Movers & Shakers(Markets)
Activity:  12 views;  last activity : 07 06 2010 20:18:09 +0000

We all know that directly or indirectly India has been affected by the whole meltdown. There are steps taken by India's government and central bank over the past month to shore up liquidity as the global financial crisis has spilled into the country's financial markets. Let us discuss about the reasons for this.

 
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1 2 3 4
1 Dollar vs Rupee
2 Banking system
3 Ineffective system
4 Capital Squeeze

Dollar vs Rupee

idea posted by Gandhi Rajan Sr. Associate, ICICI Securities
Dollar sales by the central bank to stem the rupee's slide following strong foreign fund outflows from the battered stock market. This is a very formidable sign when it comes to the economy of a country like India where the exchange rate is very important for a number of companies. 


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Banking system

idea posted by Venkatachalam C V Sr. Associate, JP MorganChase
I think the main reason for this is tax payments by corporates shifted funds out of the system and into the government's account. Planned government spending had also not materialized, and this usually passes into the banking system helping cash levels. This has seriously affected the liquidity levels in the banking system.
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Ineffective system

idea posted by Alok Kumar Singh Sr. Associate, UBS

The ineffective public system has resulted in unscheduled borrowing by the government. This in turn has fueled the rate of financial deepening.  Another reason for this is risk aversion of financial intermediaries to lend, particularly to mutual funds facing redemption pressures.

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Capital Squeeze

idea posted by Satish Pandey Sr. Associate, IL&FS Venture Corporation
There is a capital squeeze all over, for those looking to raise capital, the alternative of funding through fresh equity is not cheap either, since stock valuations have suffered in the wake of the FII pull-out. In short, capital has suddenly become more expensive than a few months ago and, in many cases, it may not be available at all.
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