----- Original Message -----
From: VIVEKANAND KINI
To: shenoy ; [EMAIL PROTECTED]
Sent: Saturday, November 15, 2008 12:52 PM
Subject: Fwd: Challenges And Opportunity
Dear Investor
Challenges and opportunity
In the month of October 2008, the BSE Sensex lost 23.9% and closed the month at
9,788 points. On a year-to-date basis, the BSE Sensex has declined by 51.8%.
The global financial crisis, exit of short-term pools of money from domestic
markets, and fears of a lower economic growth have all contributed to this
phenomenon.
Although, we in India have little control over the global financial crisis,
this is certainly an interesting time to study the fundamentals of domestic
companies and examine the impact that lower economic growth and liquidity
tightening would have on them.
Lower economic growth in the global economy will affect companies and
industries that rely on exports; for instance, software, textiles, jewelry, and
tea are India's largest exports and account for about 7% of the GDP (gross
domestic product). Exports, in total, account for 17% of India's GDP. Another
risk that must be noted is that countries like China (deprived of their natural
export market to USA), begin dumping products into countries like India - which
still has a growing economy and robust domestic demand. The commodity producers
(steel, cement) and product manufacturers (textiles, consumer durables) face
the highest risk from a Chinese dumping. Of course, the government can raise
tariffs and impose anti-dumping levies in such an event.
In addition to actual trade opportunities, the chain of trade finance has also
dried up. Companies that wish to export (or import) are unable to do so because
of the freeze and fear in the global financial system. Central banks of most
countries are stepping in to eliminate the fear of counterparty risk. In
addition to the trade flows indicated above, some companies in India were
relying on international flows to finance their working capital via a LIBOR
(London Interbank Offered Rate)-based rate. The LIBOR markets have been in a
freeze and the Indian companies have been scrambling to repay these
international loans. Some companies had made acquisitions globally using
bridge-finance from banks and PE funds. These need to be re-financed into
long-term capital sources - debt or equity offerings. With credit markets
frozen and equity markets in a tailspin, some of these re-financings are in a
spot of bother.
Simply put, the cost of financing for corporates will increase in the face of a
slowing economy. The Reserve Bank of India has taken measures to ease these
concerns to some extent.
The opportunity
Although the investment scenario has become challenging, given the extreme
volatility, valuations based on long-term earnings potential do look
attractive. Some of the share prices are back to the June 2006 levels. The
domestic economy can be expected to clock an annual growth rate of 6.5%, which
is still DOUBLE the global average.
We believe this is a good opportunity for investors with a long-term investment
horizon. Of course, it is pertinent that investors have the ability to take on
the risk associated with equities. Also, being invested in the right avenues
i.e. well-managed diversified equity funds with proven track records across
parameters is vital.
The systematic investment plan (SIP) mode of investing continues to be our
preferred investment mode. Apart from ensuring that investments are made in a
disciplined manner, it is also lighter on the wallet. In times of volatility,
investments made via the SIP mode can help lower the average cost of purchase
i.e. SIP investors benefit on account of the market volatility.
Finally, the importance of quality and unbiased advice to help you navigate
through these difficult times cannot be overstated. Your Naik Wealth investment
consultants will stay in touch with you and help you manage your investment
portfolios, thereby ensuring that you stay on course to achieve your
pre-determined investment objectives and dreams in life.
With Best Regards
SHENOY INVESTMENT AND FINANCIAL
CONSULTANTS PRIVATE LIMITED
11-A, KASHI NIKETAN, 2ND ROAD,
CHEMBUR, MUMBAI - 400 071
TEL : 6797 3433 / 2521 2111
EMAIL : [EMAIL PROTECTED]
[EMAIL PROTECTED]
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