The Dow Jones, America’s largest index, has lost over a third of its value in the global recession with Japan’s Nikkei 225 and the United Kingdom’s FTSE Index following right behind. Despite the dismal playing field, investors have found a beacon of hope India’s markets.
Markets in a Global Downturn
The Wall Street Journal’s Jackie Range reported in the paper’s International Finance section on Tuesday, April 07, 2009 that several of Mumbai’s financial houses and brokerages have become suddenly more bullish in the last month. Even with the Bombay Stock Exchange’s chief index, the Sensex, stooping to a low that was 33% off its 12 month high on March 9, it has managed to claw its way up 29% as of April 6. This comes as a great encouragement to India’s financial industry.
Becoming Slumdog Millionaires
Between the relative bargain value of the country’s stocks, the influx of spending due to cheap outsourcing on the part of the world’s wealthier but struggling nations, and the expectation of modest GDP growth in the coming year (something most economies can’t boast of); investment officers like Vibhav Kapoor at Mumbai’s IL&FS are thinking positively. “Going forward, you should see a gradual up-move happening.” he said.
Still wary of the indicators, some brokers are withholding their affirmation on assured Indian investment in the future. A major election season is on the way that some brokers, such as R. Murali Krishnan of Ambit Capital, say will keep both foreign and domestic investment at bay in the short term. "Given the impending elections, slowing economy and rising fiscal deficit, it is unlikely that India will offer any positive surprises this year." Depending on who gets elected and what the mixed party situation is, it is definitely possible that the new government may be unfriendly to the markets and not open to economic reforms.
Conclusion
The potential beneficiaries and losers in this situation are one and the same: future investors and the Indian business community. Should India’s GDP grow as expected and the country be fortunate enough to receive an economically liberal government, investors can reap healthy returns and the country’s business owners can continue to expand and hire more of the labor force as a result of that investment. But if either of these two instances unfold the other way, both investors and corporations (along with their employees) will suffer the loss, not only in terms of opportunity cost, but in possible explicit costs as well.
