ratsharp

The Credit Crunch Creeps Up on India

Indians have never been confident of growth prospects in india. Its only the ambitioius indian entrepreneur and the enthusiastic foreign institutional investor who has put in the money where their mouth is. That led to a 5 fold rise .. and today when we are down by 30%, in the face of headwinds ( which are for real) ..should we abandon the india thesis. NO ....The problem with the non believers is that they have never seen growth led by infra and capex spending ever before and it is natural for them to pooh pooh it. Empty malls are a reality in every market ... they force rentals to come down and the budding entrepreneurs open up shops again ...so the dynamics works as long as he can afford it.

There was a comment by a ubs guy ..which pretty much sums it up...
" In 2006-07, according to data provided by the Reserve Bank of India, the savings rate in India was 34% of the GDP (gross domestic product). India’s GDP stands close to $1.1 trillion in 2007. This means total savings were to the tune of about $370 billion last year.
Household savings were 28% of the economy, translating into $300 billion, and corporate savings accounted for another 6%. Half of the $300 billion household savings last year went to real assets such as gold and property while another half was parked in financial assets including bank deposits, insurance, provident and pension funds, and equities. Only $9.45 billion, or 6.3%, of household savings ended up in equities in 2006-07. This will go up to 10% this year, say analysts. Even if the economy grows by 8.5%, this 10% will translate into $16 billion. In 2005-06, only 1.1% of household savings ended up in equities. Small investors could soon call the shots in India’s equity markets say some analysts, who expect up to $32 billion (Rs1.26 trillion) of household savings to have flowed into the market in the 12 months to March 2008. This amount is almost double the record $17 billion purchases of Indian equities by foreign institutional investors (FIIs) this year, till mid-December" .... Those who invest need to understand fund flows and these numbers to guage the end to this story... dont start splurging your free advice at every sharp fall...