The global markets are tepid. The Indian markets maybe volatile yet flat today. The weekend was quite with no major news and there may be a slight bounce in the market today. If there s no bounce back this week things will get worse going forward.



Here is a verbatim transcript of Udayan's comments on CNBC TV18. Also see the accompanying video


This is an important week. Last week was a disaster 15% down that’s how much our markets lost. Over the weekend there have been some rumblings from the G7 countries on a bigger package, which could be coming and this week you’ll look forward to that. In any case the global markets are somewhat more tepid, the US cut some of its intra-day losses on Friday and this morning Asia is a bit of a mixed bag, some markets are down, some markets are up so you don’t know what quite to make of it. But over the next few days it might still be quite volatile and jerky depending on policy action that we see, so big one coming up.



No taking away from the fact that last week was a whitewash and psychologically probably pushed a lot of people against the wall?

Pushed against the wall is right. It was really such a terrible week for the market. This week is going to be important one, I don’t know how trade starts off today because you have the baggage of the Friday closing not too much happened over the weekend. I don’t know whether the market will focus on the kind of mixed mood that is prevailing in global markets today or it will focus on the fact that we had a big bounce back from the lows of the day on the Dow indicating that there is some more help which is coming from global markets.

It is a little difficult to decipher; today it might be one of those volatile, yet flattish kind of day, all over the place but eventually not going anywhere significant, it could play out like that. But again you want to believe that after a 15% fall last week given the prospect of more regulatory action this week, you probably could see a little bit of a bounce. I have difficulty saying or pronouncing the word ’bounce’ nowadays but one lives on hope.

What makes it so important, the fact that the market got so oversold almost or is it that we might be prime for everything that can be done, will be done sort of regulatory action?



The later I suspect, I think over the weekend the kind of noise that one heard from the regulators in the West is they have pretty much come around to accepting the situation as it is, which is to say if we don’t something we have had it. So basically just go out, don’t think about moral hazards and tax payers money just get the credit market working once again, and I think you have seen the first signs of that coming in from Australia. I suspect you will see much more of that over the next 24 to 48 hours; it has to happen. They cannot delay this any longer and you could almost sense that they have got a sense of urgency right now. I think the concerted regulatory action, much that you can scoff it by saying, “Big deal, they did a bailout package first and then they cut rates again, precious little it did for the stock markets.”



But at some point they have got to do something, which get the credit markets working and I suspect you will see some material moves along those lines in the next 24 to 48 hours, which will probably drive home the message that in the near-term the panic needs to ebb a little bit. That may be the starting point of a little bit of a rebound in the market. Still remain extremely cautious about the medium-term, because this will not fix a lot of world’s problems.



In the near-term, I suspect that it could lift the mood. But that makes it a really big week for the market. If by the end of this week you don’t have a rebound in global markets, then I suspect we are in for a really bad time going forward. As in you will probably see things that you have never expected to see, if you haven’t already. But I think in the next five days you will see some action, which will come as a bit of a succor to the market.



Asian Indices:



Asia is a bit mixed this morning some are down, some are up. A couple of markets like Hang Seng and Korea have moved up a couple of percentage points, it’s China which is in difficulty and Taiwan is not looking particularly strong either.

-Udayan Mukherjee, Managing Editor,CNBC TV18...

On ICICI Bank:

The market has such conviction in hammering a stock down so continuously despite all sorts of clarifications coming in. Look at the sequence of events. The management has clarified not once, not twice, but thrice. The RBI has clarified; the Finance Ministry has clarified that ICICI Bank does not face any kind of problems, and yet the stock falls at the rate of 20-25% a day, which tells you that the market probably knows something that we do not.

The market is a very clever beast. When clarifications are given and the market takes it on board, then there is no reason to fall like this. You can see that ICICI Bank probably does have a fairly reasonable liquidity position if not an utterly comfortable one. It doesn’t seem to be in any kind of problem that western banks seem to be in. Yet the stock price is falling.

I doubt whether this is any kind of concerted bear hammering or anything like that. My fear is that the market knows something that we are not aware of today, which might unfold over a period of time. I hope that the market has got it wrong. For the moment, we take the management’s clarification at face value, and it doesn’t appear that ICICI Bank has any kind of liquidity problem or is about to go belly-up or anything like that – far from it. But the screen makes you worry quite a bit about how things are progressing.

On Infosys:

Infosys is a conservative company, and it always has been and will continue to be. Therefore it is no surprise that it has come out and said that it needs to lower its dollar revenue guidance and dollar profit guidance.

It is important to understand why the market is focussed on the dollar revenue guidance because the market pretty much wants to know at this point what Infosys’ take on the business flow going forward is. It is not worried about reported numbers, whether because of the rupee versus the dollar or the dollar versus the euro, the reported numbers in rupees moves up or down. It wants to know whether core business for Infosys is going to slow down dramatically.

Principally Infosys bills in dollars. Therefore the dollar revenue and the dollar profit guidance is what the market is taking as a proxy to what Infosys thinks about its business going forward and maybe justifiably so. That revenue guidance got cut down 5%, the profit guidance got cut down 5% from its peak, and that worried the market quite a bit.

Infosys fell to Rs 1,050 in the morning and maybe it will not fall below Rs 1,000 because it gets valuation comfort, it goes into single-digit P/E multiple something that we have never seen in Infosys, and maybe it will not fall. So, the downside could be restricted to Rs 1,000. But upsides I suspect will be capped from here about Rs 1,300 odd because of the kind of murky visibility in dollar earnings that one is seeing, and what the management confirmed today.

On markets this week and the week ahead:

Enough damage has happened this week in four trading days to lose 15%, which is something that one doesn’t expect. I have been saying throughout this week that the market seems a bit overdone on the way down, and at least a technical pullback is likely and plausible. That has not come this week. That expectation has been belied. I hope it fructifies next week.

So, I don’t know whether next week again if there is more global turmoil tonight, the Sensex and the Nifty fall further and maybe the Sensex falls to sub-10,000 levels, and from there maybe there is more regulatory action, and the market moves back. But essentially for the moment, it appears that between 3,000 and 3,800 Nifty, and between 9,000-9,500 on the Sensex on the way down, and I suppose 11,000-12,000 on the way up, the market is probably rangebound. There could be more downsides. But on a day-to-day basis it is very difficult to predict.

For investors probably it is too late to sell. We are less than half of the index level of January. I think if you haven’t sold already you can hardly sell stocks that are down 80% from their peak values. So, it is tough to sell at these prices. Is it easy to buy? Not quite yet. So, I think investors should probably sit on cash, and not sell in a panic. They should probably not do anything and just watch the situation unfold over the next few days.




-Udayan Mukherjee, Managing Editor,CNBC TV18...

On the market mayhem:

It was not one of the worst weeks – it was the worst week ever. The market down 15% is as bad as it gets. It is completely unprecedented and unexpected. One does not expect to see largecap names lose 25-30% of their market cap in just one trading session flat. That’s exactly what has happened today and there are lots of reasons and lots of things which have happened in the market from Infosys, to the cash reserve ratio (CRR) cut, to the Index of Industrial Production (IIP) number, to the Finance Minister and the SEBI statements – it has been very eventful as a day.

But at the end to look at stocks like Reliance Communication down 23%, ICICI Bank down 20%, Reliance Infra down 20% - stocks in the index giving up 1/5th or 1/4th of their market value in a single session, tells you what path sentiment has come at, at this point in time. So global panic, bad local macro numbers and nobody wants to buy – there are only sellers in the market – this is classic capitulation and a bear market in full flow.

It was debilitating week for sentiment and while it has been looking oversold technically for the last couple of days, but that’s not making any difference as one can see on the screen.

On IIP numbers:

The number could be one-off but we have seen a fair number of poor IIP numbers over the last six-months. Some numbers have been okay, some have been pretty bad but the message is clear that things are slowing down quite substantially in the economy. There is no doubt about that and one would see repercussions of that not only in GDP growth but also in earnings growth – that is something which is worrying the market. So that 1.5% number might be an aberration.

It may or may not be but a lot of people in the market and in the economy seem to be in denial mode as well. They refuse to take on board any poor economic number, just wishing it away as a bit of an aberration and focusing only on the good numbers which come in.

I think the message is quite clear even if you look at or tab the newsflow from the ground that things are slowing down quite substantially and we may end up with a macroeconomic backdrop which is not as favourable as people would have us believe. That number hurt sentiment quite a bit and the market is quite convinced that things are indeed slowing down, this IIP number being an aberration not withstanding, which is why despite several protestations and clarifications from various sources, the market still closed down 7% and I wouldn’t be so sanguine that the market has not got it right.

On CRR cut:

The Reserve Bank of India is doing the right things. First things first, it has to inject more liquidity. It will have to do more. So I wouldn’t be surprised if more CRR cuts come in the next fortnight I wouldn’t even be surprised if interest rate cuts also happen, though that it is not consensus expectation at this point in time. But as one has seen in the west, these things are not quite working. They need to be there. The market takes on board, accepts the large – which is being given and then just hammers stock prices down even more.

So while this is a help, it will ease liquidity in the system – may be cool call rates a little bit – but bankers have been on record saying that this will not ease lending rates in the system and banks might even choose to hold on this liquidity and not lend it out because of the kind of industrial growth situation they are witnessing. So it is not like this money will come into the system. It might just lie with banks who might want the cushion of extra liquidity at this point in time. Will it ease the margins situation which brokers and bankers are facing at this point? May be somewhat but even so I doubt whether this will have a hugely material impact on how things are progressing.

Is the market oversold? Are things getting overdone? For sure they are but that’s how typically things happen in bear markets. In bull markets too they were getting overdone, since November-December-January and now we are seeing the opposite end of it and that might well continue for a bit longer. So yes, short answer to this – the regulators are trying both globally and locally and they will do more to alleviate the pain but barring short-term bounces which might happen because of these measures in the medium-term we will still have to go through very rough times.

-Udayan Mukherjee, Managing Editor,CNBC TV18 ...

On Earnings:


Earnings is a different matter altogether. While GDP growth will fall, I think the pace at which earnings might fall could be even more dramatic than GDP growth, because there is lot of elements to GDP other than just pure corporate earnings or manufacturing sector. So you could probably see a lot more deterioration in the corporate earnings profile over the next few quarters if things continue like this. So at the micro level the damage might be far more.



Two months back the assumption was that we are not growing that fast any more, so last year we were thinking about 20% growth so sadly we will have to get resigned to 15% growth, but 15% is in the bag, do not question that. Now I have heard a couple of people talk about 10% growth. What if at the end of the next couple of quarters, we go back and say there is no growth or corporate earnings for a large number of companies is absolutely flat? Has the stock market price that in fully or a completely flat earnings growth profile?



You can imagine that a large number of sectors like real estate, autos and metals are probably going to show you negative growth. By the end of this year,many commodities, real estate, autos perhaps many other sectors, which are dependent on commodities, natural resources could all report negative growth. So what is so sacrosanct about the overall index earnings not becoming flat? In that case, you are talking about earnings recession as well. So then does 10-11 times look so cheap?



The only point one is making is this is not an environment where you need to be complacent about. Do not assume things for given that this economic growth, this earnings growth is in the bag and that is my metric with which I construct valuation and stock price levels. Things are not very fluid; they could turn out easily far worse which the stock market has tried to price in. I think a lot of pricing has happened.



The one thing is that yes things are bad but the stock market is also at 10,000 now. The stock market is no longer at 14,000, so a lot of it has been priced in maybe a bit more needs to be priced in and I am sure that the market will do it at its chosen pace.


-Udayan Mukherjee, Managing Editor,CNBC TV18 ...

To me the bigger worry is even if you somehow stretch through the next couple of months and arrive at more than 7% or even if it closer to 7.5% by the end of this fiscal, should we all be rejoicing or should we now start worrying about What lies ahead given the way and the pace at which things are worsening globally and locally?? What lies ahead after March 2009? What kind of numbers could we then be seeing? We have come out of four years of very heady stock markets and heady economic growth. Therefore the pace at which opinion tends to worsen is also a little sticky because we are spoiled with seeing extremely good numbers at the macroeconomic level and at a micro stock market and a corporate level. So people will always be slow adjusting their views downwards. People are people, whether it’s the Finance Minister or stock analyst or the head of the Prime Minister’s Economic Council; people are the same.



So in the stock market when you come out of a fantastic trajectory of earnings for 15-16 quarters then the downgrades always tends to be extremely slow and the stock market always leads, where stock prices fall first and the downgrades follow later. I think that exact sequence will follow this time as well and what we are leading up is that things worsening progressively from quarters and us landing into fairly bad soup in the FY10.



So the bigger question what should be asked economically is not whether we can get away with 7% growth this year but whether we are staring at sub-6% growth in FY10 and that is a data point and a fact then one should be prepared to ask and challenge squarely because we don’t want to be in a pretty scenario with denial saying, “we cannot mention 6% its absolute sacrilege.” That probably you are staring at next year.



What if we lend up in FY10 at a 5.7% or 5.8% growth? How would that sit after looking at 9.5% GDP growth in the matter of just about 18%. Would you then celebrate and take joy at the fact that you are still growing at 5.8% or 6% or would you say, “It was 9.5% and we have already got skittle down to sub-6%. That is a real threat and things have to improve materially on the ground for us to be not presented or faced with their reality in about 6-9 months from now. “

Q:Even about this year, are we being a trifle optimistic in expecting even 7%? The stock markets have discounted and will discount more but this is just an August number, that is another more than half the year left to go and it is 1%; the economist was talking about industrial recession so probably we are going to see contracting numbers. Even this 7% and whatever EPS growth we were looking for the Sensex it was shot of 1,000 after the corrections but should we scale that down considerably and therefore look at a very different GDP number, IIP number and Sensex EPS forecast for FY09 itself?



The stock market in its wisdom has been doing it. That is what is getting priced in, the way stock prices have been falling for the last few months, that is clearly the market’s apprehension. 7% is not in the bag, 13-15% earnings growth is not in the bag by a long stretch because when things start worsening, they worsen far more rapidly than one can ever envisage.

This is not to suggest that there is only gloom and doom on the horizon and we are harbingers and messengers of gloom and doom. This is exactly how things have played out in the past. The things go up for a while and then hang around for a few quarters before it starts decelerating due to the impetus of the past and as momentum takes a while to turn down quite so decisively. But now that the momentum on the way down probably has started and the worse the numbers look, the worse sentiment will get and that itself will unleash. It will become like a vicious cycle as we have seen in the past. So you maybe 7% is not in the bag, maybe we see sub-7% numbers in fiscal year 2009, which sets the platform for a much lower GDP growth and economic growth in 2010.

-Udayan Mukherjee, Managing Editor,CNBC TV18...

Markets are witnessing fresh bouts of selling and have plunged further on the back of weak IIP numbers. Benchmark indices are under extreme selling pressure, due to heavy sell off seen across the globe. Meanwhile, the news of RBI move to cut CRR by 150 bps with effect from tomorrow has given some cushion to markets and frontline indices have seen mild recovery from lows of the day.



Amid the `industrial recession` as named by the Prime-Minister economic advisory council member, Udayan said there is a pronounced slowdown which will only deepen with the passage of time given how things are unfolding globally. That’s what the stock market has been pricing in over the last few weeks. So it should come as no surprise, that the bad news is now coming out because that is exactly how it happens, stocks fall first, then bad news follows.

On `industrial recession`:



People have been in denial all along and this is typically how things work out. In previous cycles too, this is exactly the sequence things follow - first the stock markets fall, then the CEOs, economists and the government tell you that ‘nothing is wrong and things will be fine’ Not just the Prime Minister’s economic council, but recently you had the finance ministry you that we are still on target for 8% this year and 9% next year. That’s the level of denial that we see in this country. So far, not significant segments of the CEO population have come and told that things are bad. But this is not a number for the figment of somebody’s imagination, this is a data point, the kind of capital goods and manufacturing data point that you are witnessing today. Just juxtapose that with all the voices that you have been hearing every time an IIP number comes out. We have comments like ‘Everything is fine, our order books are healthy and there is no evident sign of a slowdown’, So obviously these signs are coming from some other planet because we are not facing any kind of slowdown at all, this is just a classic denial. Finally the CEOs will come around in the next couple of quarters, to tell you that things have changed and they changed while they were in denial mode, they didn’t change day before yesterday. So what we will follow right now is that the estimates of GDP growth will get crunched down further and the bigger problems will come for the next year which is FY10 when GDP and manufacturing growth assumptions will fall off quite significantly. But now when you do a lot of channel checks with companies on the ground, particularly many of those SMEs, a lot of stress is visible which we are not hearing directly out in the open or in the media -- which is companies freezing employment, laying off employees, raising bench sizes, resorting to production cuts and stalling purchases of capital goods in a significant way. All of this is symptomatic of the kind of slowdown which is unleashing. So as some people have been saying for the last few weeks that ‘our house is very much in order, India is a great story’, it might be a better story in a relative sense but that is not to say that India is in a very good economic and corporate situation at this point. Far from it, we heard the IBA chief telling that they are not lending in any major manner and all that they want to do is hold on to liquidity at this point and companies which bankers are hearing directly from them are beginning to cut down production. So there is a pronounced slowdown which will only deepen with the passage of time given how things are unfolding globally and that’s pretty much what the stock market in its wisdom has been pricing in over the last few weeks. So it should come as no surprise, that the bad news is now coming out because that is exactly how it happens, stocks fall first, the band news follows.



On GDP (Gross Domestic Product):



The industrial sector is not in shape and the point is that we are looking at current figures and that’s the dangerous bit, it’s pretty much like the Infosys example. This quarter numbers were great but the market is still hammering the stock down because it worries about the future. At this stage you are already looking at these kinds of 1%-1.5% IIP (Index of Industrial Production) numbers. Now the question is not whether in the next couple of quarters because the first half of the year was not too bad and which is already behind us, the average number turns out to be 7% and more. I do not think that should cause any jubilation.



-Udayan Mukherjee, Managing Editor,CNBC TV18...

On Nifty levels:

We closed at 3,500. Roughly 7.5-8% takes you to that 3,200 plus zone. We will see levels between 3,200 and 3,250 on the Nifty. But we should not go by all this because if anybody has asked us whether we would have foreseen the Dow at 8,500 so soon, then I don’t think any analyst there would have been said that you are going to see DOW at 8,500.

So we don’t know what level we will hold 3,200-3,400. We are in a free fall kind of situation. At some point though one doesn’t know where it will stop we will get a pull back but the further you are getting away from the 3,800 mark which held for many months, the chances are that now becomes a very roof over the markets head.

Maybe any technical pullback has that as a distant target. If we go to 3,000 in this fall and then to climb from 3,000-3,800 will require a 25% rally. So even if we have a spectacular bear market rally from lows of close to 3,000- a 25% then also you get capped at 3,800 Nifty. So that is now firmly what was the big support for the market, is the big ceiling over the markets head and that sort of changes things completely.

Where is the floor? - We don’t know. This morning we will probably start at 10,500-10,600 on the Sensex and so you are pretty much around 10,000 levels. Is it looking like the bottom is here?- Clearly the screen is not telling that the bottom is here, so don’t even get there. The best trade this whole year is not to be trying to find value in stocks etc. I think we will still be surprised by the kind of lows we will see. There is no point mentioning levels now. Last time we spoke we were saying around 10,000 one should buy this market but maybe now you revise your opinion and say at 10,000 you start buying but you don’t buy your house and put it in the market because it looks like events are overtaking. 10,000 is ten times and you are buying at historical floor levels in the market but those have no meaning.

So you say that, I don’t know if market is going to 8,500-9,000 which is a possibility in this cannot be ruled out but I don’t know whether it will get there. So as we said 10,000 is a good enough level, at point you start buying and if the market continuous to slide because of global panic then you buy it through 10,000 or 9,000 or wherever the market will finally stop. But at 10,000 if we get there over the next day or two purchases should commence and at least for the first time in 2008 – saying that you should go out and deploy cash. Because so far it’s never looked like a good time to go out and buy stocks from an Indian perspective. We will be surprised by the levels as we always are in bear markets.

-Udayan Mukherjee, Managing Editor,CNBC TV18...

As suggested in my previous writings, the government has gone ahead and reduced the CRR. However, it will not work – at best it will result in relief rally in stock exchanges. This kind of piece meal approach will not work. It did not work with US government for the last one year. The government needs to do the following SIMULTANEOUSLY :- - Reduce CRR to 4%. - Cut bank bank rates 7% - Cut SLR to 22% now and to 20% in another 4 weeks - Unlimited protection to bank deposit for next 3 years. - Increase spending in infrastructure - start announcing projects and start talking about upcoming spending - Guarantee interbank loans - otherwise CRR cut will not work. - Be ready to provide finance to private companies in trouble, using one of the many government arms - We are at two more risk - in terms of flight of capital :- a) Current account deficit - our creditors worldwide are facing a liquidity crunch - likely to call in the money or not roll over the debt – this kind of thing has had lead to massive crisis in the past in countries across the world. b) Developed economies will withdraw cash parked in India in equities and other assets - if not tackled properly this will lead to a asset/ securities meltdown in India This flow of capital will need to to be managed (more thoughts on this later) Government has to launch a massive co-ordinated and sustained attack on the problem facing our economy and not throw one pebble at a time if it`s measures are to have any impact. Irrespective of the Government does, we are very likely to hit 5% GDP. If the government acts fast and decisively, sub 5% levels can be avoided....

About ICICI BANK I think you are right. In today`s 5 pm news telecast by the PEOPLE Channel of KAIRALI TV in Malayalam language the top story was that State Bank of India has agreed to grant loan of Rs.1000 crores for 45 days @20% interest to ICICI Bank to meet the present crisis in that bank. The story further stated that this loan was given at the behest of our F.M. Mr. P Chidambaram despite opposition fron SBI top brass. If ICICI Bank is not facing any problem what is the need for SBI help ?...

Uhayan, How do u see markets perform over the period of next 2 weeks. Do you see a pull back to 3800-3900 on nifty. what is your view on SAIL and NTPC. Can you please provide your view on these stocks. And is there any FII money in these stocks. It would be great if you can provide your view on markets recovering from these crashes and pulling back by the mid of November. Regards, Param...

Will the government bite the bullet ----------------------------------- India is following US with a 6 month lag. Fortunately we don`t have the kind of credit crisis that US is facing now . Nevertheless, growth would be significantly impacted across sectors. GDP to go down to sub 5% levels. Profit hit for nearly all Nifty scrips, with some going into losses. However., we do have a liquidity crunch similar to the US, though not so bad. Unless the government acts fast, Indian credit markets risk a shutdown and the economy risks going into a recession/ near recession. US Government stayed on the sidelines for too long. The bailout and the rate cuts should have come around beginning of this year. Though we have very competent economist at the helm (and I have a great personal regards for them) , still the Indian government is also doing exactly the same thing as the US government did 6 months back - stay on the sidelines , take half hearted measures and provide optimistic sound bytes. Government to immediately do the following if we are to avoid a recession / near recession (significant slowdown is now certain) :- Immediate cut in CRR to 6% and to 4% in a months time. Will infuse liquidity. Also cut bank rates by 2% to 7% and SLR by 5% to 20% in a staggered fashion over 4 to 6 weeks. Unlimited protection of savings in banks for the next two years without limit. Will create confidence for account holders and avoid a run on banks Direct funding to commercial enterprises and banks by opening a lending window against collateral of securities. Can be routed through any one of government`s funding arms. Increase spending in Infrastructure. To boost incomes, GDP and keep economy in track Yes, inflation will increase, but a recession/ near recession will be staved of. Will the government bit the bullet with elections not so far away. US government did not do it 6 months back. Now with its back to the wall, election or no elections , it has just no choice....

Recalibration begins -------------------- As a consequence of the economic crisis, the economies of the world and India will start going through a recalibiration process. This is the very beginning of recalibration of Economy and markets (Indian as well as global). Things will get far worse and the process will be painful. People`s day to day life is going to be impacted; for some, very severely. However a time of great opportunity for the long term investor. A decade from now Indian economy will emerge far far more stronger. Stock Market outlook -------------------- - No change in my assessment. Given a 12K breach, there is now more than 70% chance of a 10K breach - On the upside , my estimates suggest that Sensex likely to go up to 40K (min 25K) by Sept 2013 and 80K (min 45K) by 2016 Investment Strategy ------------------- - Begin Accumulation. If you have Rs. 100 in free cash, invest Rs 50 right away. Remaining Rs. 50 post 10K breach. Monthly savings – hold off half for 10K breach and use the remaining for regular accumulation. - Existing holdings – Hold on to existing investments, unless you need cash urgently. Be ready for a long haul. - Be ready for a seven years kind of time span. Key Drivers : Global Economy ---------------------------- - US in recession : the question now is not if so, but, how bad will it be and will the country go into a depression. - Credit markets : in US and Europe have absolutely frozen out. Nobody is ready to lend to anybody. There is a deeps sense of mistrust. Banks, corporates and even government bodies are looking at severe cash crunch. If the liquidity situation does not improve in next month or so, US risks a complete economic shutdown, similar to the great depression of 1929. - US financial markets: At best there will be complete restructuring and at worst a complete meltdown. More big names will go down under - Europe / Japan : Europe and Japan already in recession like states. Japan Q2 GDP contracted 0.6% QoQ. Europe growth estimates for 2008 at 1.7% and falling. - China – in slowdown mode, similar to India. - Global impact of US and Eurozone meltdown/ recession : Economies across the globe would be impacted significantly though by differing degrees. Global slowdown certain, global recession likely. Key Drivers : Indian Economy ---------------------------- - GDP Growth : 5% or lower levels over next two years - Slowdown across all sectors. As is the case in all downturns , the hardest hit would be the cyclical and commodities sector. - IT/ BPO : Margins coming down. Outsourcing will become more difficult as US/ Eurpoe jobless claims mount. - Steel / Cement / Mining/ Refining /Commodities: Will be worst hit as the price cycle takes a downturn. - Banking : Will be badly hit. Credit offtake falling , margins getting squeezed and defaults rising. - Telecom / Pharma / Consumer goods : Not so badly hit. Though growth rates will come down with varying degrees. - Capital goods : Badly hit. Corporate will hold off capital goods investments. - Infrastructure : Growth will slowdown. Government will be short of cash to fund projects till the economy goes on a recovery path. - Auto / 2 Wheeler : 4 Wheeler will be badly impacted. 2 Wheelers less so. - Labor prices : Salaries, bonuses and increments would be adversely impacted. - Labor market : Layoffs will start in H1-09. - Land prices : Prices will come down. Distress sales likely by developers as even the big ones will run out of cash in 18 months. Some will go bankrupt. - Interest Rates : Will start coming down. In a couple of years we`ll again see housing interest rates at 6% levels..........

Customers see the liquidity,stock market participants concern about the profits.... there may be liquidity in the bank for its survival for few more months,or govt may help them out of way.... but investors worry is whether bank gives profits or not.... at this point,the management/rbi/fm not commented on their profits.... that is the reason for stock falling on daily basis.... the lquidity and profits are quite different terms.... Infy,one of the most respectable companies in inida has givien negative guidance for the coming quarter.... that cant be digested by the market.... if the sitution continues like this for some more time in the continents of US and Erope,the topline could be effected by nearly 30% which can give lot of preesures on the company`s business model....so,as far as infy is concerned worst has just begun.... pl note that there are no clear signs of reversal of recession in global economy soon.... Regarding markets behaviour,yes there may be a chance of some bounce as global leaders working hard towards the stabilisation of financial markets worldwide.... but continuous fii sellings,lack of domestic investors confidence,expected mutual funds redemption pressures etcetc may offset near term positives if any.... pl note that negative surprise is given by latest iip numbers.......

On ICICI Bank: The market has such conviction in hammering a stock down so continuously despite all sorts of clarifications coming in. Look at the sequence of events. The management has clarified not once, not twice, but thrice. The RBI has clarified; the Finance Ministry has clarified that ICICI Bank does not face any kind of problems, and yet the stock falls at the rate of 20-25% a day, which tells you that the market probably knows something that we do not. The market is a very clever beast. When clarifications are given and the market takes it on board, then there is no reason to fall like this. You can see that ICICI Bank probably does have a fairly reasonable liquidity position if not an utterly comfortable one. It doesn’t seem to be in any kind of problem that western banks seem to be in. Yet the stock price is falling. I doubt whether this is any kind of concerted bear hammering or anything like that. My fear is that the market knows something that we are not aware of today, which might unfold over a period of time. I hope that the market has got it wrong. For the moment, we take the management’s clarification at face value, and it doesn’t appear that ICICI Bank has any kind of liquidity problem or is about to go belly-up or anything like that – far from it. But the screen makes you worry quite a bit about how things are progressing. On Infosys: Infosys is a conservative company, and it always has been and will continue to be. Therefore it is no surprise that it has come out and said that it needs to lower its dollar revenue guidance and dollar profit guidance. It is important to understand why the market is focussed on the dollar revenue guidance because the market pretty much wants to know at this point what Infosys’ take on the business flow going forward is. It is not worried about reported numbers, whether because of the rupee versus the dollar or the dollar versus the euro, the reported numbers in rupees moves up or down. It wants to know whether core business for Infosys is going to slow down dramatically. Principally Infosys bills in dollars. Therefore the dollar revenue and the dollar profit guidance is what the market is taking as a proxy to what Infosys thinks about its business going forward and maybe justifiably so. That revenue guidance got cut down 5%, the profit guidance got cut down 5% from its peak, and that worried the market quite a bit. Infosys fell to Rs 1,050 in the morning and maybe it will not fall below Rs 1,000 because it gets valuation comfort, it goes into single-digit P/E multiple something that we have never seen in Infosys, and maybe it will not fall. So, the downside could be restricted to Rs 1,000. But upsides I suspect will be capped from here about Rs 1,300 odd because of the kind of murky visibility in dollar earnings that one is seeing, and what the management confirmed today. On markets this week and the week ahead: Enough damage has happened this week in four trading days to lose 15%, which is something that one doesn’t expect. I have been saying throughout this week that the market seems a bit overdone on the way down, and at least a technical pullback is likely and plausible. That has not come this week. That expectation has been belied. I hope it fructifies next week. So, I don’t know whether next week again if there is more global turmoil tonight, the Sensex and the Nifty fall further and maybe the Sensex falls to sub-10,000 levels, and from there maybe there is more regulatory action, and the market moves back. But essentially for the moment, it appears that between 3,000 and 3,800 Nifty, and between 9,000-9,500 on the Sensex on the way down, and I suppose 11,000-12,000 on the way up, the market is probably rangebound. There could be more downsides. But on a day-to-day basis it is very difficult to predict. For investors probably it is too late to sell. We are less than half of the index level of January. I think if you haven’t sold already you can hardly sell stocks that are down 80% from their peak values. So, it is tough to sell at these prices. Is it easy to buy? Not quite yet. So, I think investors should probably sit on cash, and not sell in a panic. They should probably not do anything and just watch the situation unfold over the next few days. -Udayan Mukherjee, Managing Editor,CNBC TV18...