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Corporate India – The Aftermath of Mumbai

December 1, 2008

In the wake of the events in Mumbai last week, investors could turn more defensive. We feel that because of the resilient spirit of the society, valuations in the market and likely other support from investors and governments everywhere, there is some chance [though little] of any lasting economic or market impact, except for in some select sectors, where it is inevitable.

Additionally, with the change of guard in the Finance Ministry will have almost no impact as Dr. Singh was constantly in touch with the developments through his trusted lieutenants in the south block including Dr. Montek Singh and Dr. Rangrajan.

The immediate impact of past attacks on equity markets has not been significant. The indices have shown falls of less than 0.75% in most instances with only 1 or 2 instances of fall of over 1%. The general weakness in the markets may cause some downward pressure. Foreign tourist inflows are likely to slow down. Western countries have either issued travel advisories or cautions. Media has reported about 15% cancellations in airline bookings currently and Hotels is the only sector to be hurt immediately.

RBI has announced further measures aimed at supporting domestic liquidity, with particular emphasis on sectors that may be facing some degree of stress. In recognition of the weakening and challenging conditions in capital markets, our suggested picks are those backed by strong structural growth themes with healthy cash flows.

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