Indian Markets: It Can Get More Frightening

Fortune magazine has compiled views on the global and US economy from some of the leading experts in the field - the likes of Nouriel Roubini, Bill Gross, Jim Rogers and Wilbur Ross. And the outlook mentioned by most of them seems frightening. Here are key excerpts of what these men have predicted:

Nouriel Roubini (Economics Professor, New York University) - "We are in the middle of a very severe recession that's going to continue through all of 2009 - the worst U.S. recession in the past 50 years. It's the bursting of a huge leveraged-up credit bubble. There's no going back, and there is no bottom to it. I wish I could be more cheerful, but I was right a year ago, and I think I'll be right this year too."

Jim Rogers (Commodity guru) - "U.S. stocks are still not attractive. Historically, you buy stocks when they're yielding 6% and selling at eight times earnings. You sell them when they're at 22 times earnings and yielding 2%. Right now U.S. stocks are down a lot, but they're still very expensive by that historical valuation method. I'm not saying it will fall that far, but it could very well happen. And if it gets that low and I'm still solvent, I hope I'm smart enough to buy a lot. The key in times like these is to stay solvent so you can load up when opportunity comes."

Bill Gross (Founder, Pimco) - "Investors need to recognize these titanic shifts in market and public policies and be content with single-digit returns in future years. Perhaps the most lucrative pockets of value are in high-quality corporate bonds and preferred stocks of banks and financial institutions that have partnered with the government in programs such as the Troubled Assets Relief Program (TARP). While their profitability may be restricted, their ability to pay interest and preferred dividends should be unhampered. Above all, stick to high-quality companies and asset classes. The road to recovery will be treacherous."

Incidentally, these three experts were crying foul by the middle of last year that the US and world economies were going to suffer a serious downturn due to bursting of the credit and housing bubble. The rest, as they say, is history. Trouble has now, in fact, moved from the financial markets to the real economy. There has been a worldwide slowdown in economic activity, with some countries like the US, UK and Japan having entered recession.

The impact on the Indian economy is also starting to show, as economists are revising the GDP (gross domestic product) growth estimates downwards. In the latest instance, the RBI governor has predicted that the next financial year (2009-10 or FY10) is likely to be difficult for the Indian economy.

As for the stock markets, if one were to go by views of experts like Mark Mobius and Rakesh Jhunjhunwala, the worst seems to be over for Indian stocks. "The malaise of the West isn’t a problem India is facing; we don’t have overextended banking systems or overextended credit. The basis of India’s economic growth has far deeper roots than many other countries," Jhunjhunwala said and Bloomberg reported.

Comments

[Ganesh Sastri:]

The heading and the conclusion are CONTRADICTORY. Somebody should read the article and then give appropriate title.

2008 Dec 11 09:19 AM

[debtfree:]

Stupid title ... if the article is on India make the whole article on India. Also dont just report on what an expert said put some analysis behind it. What is the point of articles like this?

2008 Dec 11 10:15 AM

[Elaine Supkis:]

India is sliding down the exact same slope all the other major economies are going down only it has one nasty added problem: terrorism and the possibility of war with a nuclear neighbor. Not exactly a bright picture, I may add.

All the public talk about how this isn't going to fry Mumbai's stock market is whistling past a rather large graveyard.

2008 Dec 11 12:01 PM

[carey_jim:]

India has always been misrepresented in the American press:

The native Americans were almost never Indians and we write articles about India which are really about America.

Nothing has changed.

2008 Dec 11 01:37 PM

[User 309931:]

Agree with the above!
I thought India had good future potential, the ITLE made me think there was expert opinion to oppose my belief.
The CONTENT focussed very little on India and the CONCLUSION contradicted the title.
I normally expect better from Seeking Alpha

2008 Dec 11 09:01 PM

[Panda:]

I think India has bottomed. It's economy not dependent on world, but self-sustained. On a different track - just a few economies will do well in the near term. India is one.
I bought EPI and Mindx. India is at the beginning of a big rise over time.

2008 Dec 12 03:10 AM

[kgalli:]

reading the title, the name of the author, and finally the content makes me realize seeking alpha truly is nothing more than a speculative blog at times, and anyone can post an article for all to read with relatively little insight, expertise, or original material...bordeline dangerous. im shocked at the lack of background credibility of some of their authors, these people should have background and be vetted

2008 Dec 12 10:22 AM

[Maya_:]

kgalli - This is the problem with equitymaster. Their research quality is perhaps the poorest I have ever seen. Look at this article - they state views of well regarded folks but are too scared to offer their own perspective.

Does anyone know of a good source of research information in India. That is other than equitymaster which I find lacks insight into a company, industry or sector and of course their calls are mediocre at best. I like the macro insight put out by Uday Kotak, but again when you see the quality of their staff its laughable.

2008 Dec 17 07:18 AM