Expert Zone
Straight from the Specialists
Rating downgrade a credible threat for India
(Rajiv Deep Bajaj is the Vice Chairman and Managing Director of Bajaj Capital Ltd. The views expressed in this column are his own and do not represent those of Reuters)
Indian stock markets have hardly gone anywhere since June, with the Nifty hovering in the 8-9 pct range. But the coming months may see a breakout of this range as volatility, as measured by the India VIX index, seems to be rebounding from four-year lows, after having fallen for three months in a row. A short-term break, out of the range, on the downside seems more probable.
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Having said that, the recent collapse in stock prices of some companies, in which promoters had pledged a significant portion of their stakes, shows that the system is cutting down on leverage at the very grassroot level — the stock broker. When this happens, you know that ‘the bottom is nigh’.
The near-term outlook for Indian markets, however, also hinges on developments in the U.S. and Europe. U.S. equities seem to be at the height of their infatuation with QE3 and may be in for a rude jolt.
U.S. drops from AAA to AA+
(The views expressed in this column are the author’s own and do not represent those of Reuters)
It was S&P that took the lead and downgraded the U.S. with a ‘negative outlook’. The other rating agencies are not comfortable either with the current debt and fiscal status of the U.S. government and may only confirm later what S&P has already done now.
