From the day the news of Greece crisis has entered the market, Indian markets are running mainly on the foot prints of global clues. Today GDP numbers came in the market giving signs of strong signs of Indian growth sustainability. But still both SENSEX and NIFTY closed in red. This creates a question in a logical layman in India that why after giving so many acid tests also India is unable to attract foreign investors?
If we see now world over, US economy is stuck up in economic spiral where it is giving money to their people to spend and trying to show that economy is recovering. But up and downs in economic data like consumer confidence index, unemployment data, manufacturing index etc. clearly shows that US is fundamentally weak. And doing nothing to repair it from the base. (i.e. decreasing its debt ( which is 500%of its GDP) by increasing savings and increasing real productivity in US)
Turning to European nations, Greece is only the starting… although Greece received help from IMF, ECB and other euro countries, it has long way to go … by cutting the salaries, increasing taxes to a large extent which is unrealistic at this point of time.. And also not good for local people. And same stories are going in Spain, Portugeal, and ice- land. This is making Euro weak against major currencies in the world, which is going to affect the International trade on a great extent. As Europe makes large part of world imports, it will reduce demand in world market, will affect exporting countries like China. Till now Europe has 434% debt/GDP ratio which is also fairly high!!
And coming to Japanese Economy, the main concern here is there is too less young population. Pension amount to retirees comes mainly from savings of working people. So Japanese problem till now have no solution to work out.
And the big competitor in the race of attacting investors to India is China. But China has made some irriversable mistakes in the hunger of growth. It has invested too much in Infrastructure, which is of no worth as there are no buyers for these properties. In addition to that, stringent policies of Chinese government making foreign investors reluctant towards investing in China. And the main strength of china i.e. Exports to US and Europe is taking a big hit due to crisis.
And the tightening policies of Chinese government to control Real estate bubble from bursting, commodity demand from china is getting affected. This has direct impact on Korean and Brazilian exports.
The only reason that India can withstand in this crisis is the domestic demand. A large market is untapped in India. And although India has exposer to all these world over markets, the domestic untapped market is last hope to sustain in crisis. And moreover the investor friendly policies of Indian government defiantly help to attract to foreign investors. India don’t have any risky levels of debts to repay. And is using caliberated approach towards Capital account convertibility. So Indian markets will defiantly grow better than the other countries. Only the concern is that this growth pace will be somewhat reduced by the crisis bearing countries.
And the final answer to the question put in the starting of the article is that money gets attracted where it has chance of growth. Money is not loyal to any country or any asset. So although world over all biggies are withdrawing money and investing in safer assets like gold or sitting on hard cash in $. But they will soon realize that to grow their money they have no other option than Indian Markets. So now if you have savings invest in stocks stepwise and try to leverage the opportunity of buying stocks at lower prices. After 6-7 months You will get good returns on your savings.
Always remember in the financial market, ‘only the person have guts to take benefit of others weakness, survives and makes profits.’ :)
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