Morgan Stanley:India EconomicsMajor Slowdown in Investment Cycle Ahead Investment cycle peaked in F2008: Based on the trend in fundraising activity, it appears this capex could have increased to 37% of GDP in F2008 from 35.9% in F2007. The key driver of this improvement is the sharp pick up in private corporate sector investments to 16.1% of GDP in F2008 from the bottom of 5.2% in F2001. Clear signs of slowdown over the last few months: A number of indicators show that investments growth has decelerated over the last six months. Capital goods output growth has slowed to 6.8% during the three months ending June 2008, from the peak of 24.2% forthe three months ending October 2007. Similarly, the trend for aggregate corporate fund raising has also suffered over the last six months. Macro environment remains challenging: We believe the combined impact of slowing domestic consumption, higher domestic cost of capital and reduced capital access from international capital markets will result in further major slowdown in investment cycle over the next 12 months. Recovery unlikely until 2010: We believe that even if some banks start to cut lending rates in the next six months, the overall borrowing costs will remain high until last quarter of 2009. Similarly, we do not see a quick revival in capital inflows over the next 18 months. Weexpect the aggregate investment to GDP ratio will decline to 32% in F2010 from 37% in F2008. Repeat of mid-1990s cycle? In the 1990s, the private corporate capex to GDP ratio increased to a peak of 10.4% in F1996 from 6.1% in F1994, but later declinedgradually to 5.2% in F2001. We believe the current macro economic trend has many similarities to the 1990s cycle, but the duration of the down cycle will depend on the global macro environment particularly for emerging markets.Safe Harbor Statement:Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints. Nothing in this article is, or should be construed as, investment advice. __._,_.___ *****************************************http://in.groups.yahoo.com/group/investwise/INVESTMENTS IN INDIAWe are low-risk, long-term investors. Stocks, mutual funds and the entire investment gamut. Only financing/investment avenues in India will be discussed. For any assistance, questions or improvement ideas, contact [EMAIL PROTECTED] ==== Check our LINKS and FILES sections for a world of information. REGULARLY UPDATED.NEW! ==== Check "Tracklist" in Links and Files sections for Investment Ideas.****************************************************************Your email settings: Individual EmailTraditionalChange settings via the Web (Yahoo! ID required)Change settings via email: Switch delivery to Daily Digest Switch to Fully FeaturedVisit Your Group Yahoo! Groups Terms of Use Unsubscribe __,_._,___
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