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From earlier part...
4. This was not an end. The lending Banks like CitiGroup, Wachovia, etc pooled the sub-prime assets and I-banks like Merill, Lehman, etc sold it to other investors as mortgaged back securities. In simple terms investors like Mutual funds, Banks, Corporate treasuries invested in units of these mortgaged back securities in order to earn a higher rate of return over treasury return. Thus the repayment made by sub prime borrowers was passed on to the MBS investors in form of repayment of principal and interest. By this strategy banks converted 50% of their home loan receivables into liquid money. Given the fact that institutions giving out the loan did not take the risk, their incentive was in just giving out the loan. Whether the individual taking the home loan had the capacity to repay the loan or not, wasn\`t their problem. With stock markets booming and the system flush with liquidity, many big fund investors like hedge funds and mutual funds saw sub-prime loan portfolios as attractive investment opportunities. Hence they bought such portfolios from the original lenders. This in turn meant the lenders had fresh funds to lend. The sub-prime loan market thus became a fast growing segment. Thus, proper due diligence to give out the home loan was not done and loans were extended to individuals who were more likely to default. These banks also insured the risk of credit default by entering into credit derivatives. Credit default Swap (CDS) was one of the credit derivatives entered into by these banks to seek protection for credit default. The big question here was whether the person selling protection was capitalised enough? This was a form of private insurance which was not regulated by Fed. I-Banks and monoline insurers (who insure only mortgaged bonds) started selling credit default protection beyond their net worth. These underwriters hedged part of their CDS exposure by entering into credit derivatives with other banks/institutions. In December 2007, the Bank for International Settlements reported derivative trades tallying in at $681 trillion - ten times the gross domestic product of all the countries in the world combined. Being banks of the first order Credit rating agencies did not hesitate in giving the best rating to these bonds/units. Higher Credit rating for these bonds coupled with default insurance was an open invitation for Asset Management Companies, banks, etc to invest in them as their investment policies allowed investment in investment graded securities.
Remark on this write up.....Global Copy Rights reserved with Training8m
Training8m, Australia...
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Thanks. Of course 8500 sensex is just possible but not 3000 sensex....
In reply to:
US markets open red
Posted by :
Sriman35
Just a thought, I am not expecting that. In my opinion Sensex will not fall below 8500.
Let us hope for the best.
Regards,
Sri 
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Just a thought, I am not expecting that. In my opinion Sensex will not fall below 8500.
Let us hope for the best.
Regards,
Sri...
In reply to:
US markets open red
Posted by :
vkk43
Let us not expect that. 5 year low sensex was 3000 in March 2003.
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Let us not expect that. 5 year low sensex was 3000 in March 2003....
In reply to:
US markets open red
Posted by : Sriman35
The BIG question now is `Are Indian markets heading to a 5 year low..!??`
Regards,
Sri
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The BIG question now is `Are Indian markets heading to a 5 year low..!??`
Regards,
Sri...
In reply to:
US markets open red
Posted by : MMB Messenger
US markets open in red today. Dow Jones, Nasdaq and S&P 500 touched their 2003's low. Stocks have slumped to 5-year low.
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what is US market open?...
In reply to:
US markets open red
Posted by : MMB Messenger
US markets open in red today. Dow Jones, Nasdaq and S&P 500 touched their 2003's low. Stocks have slumped to 5-year low.
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US markets open in red today. Dow Jones, Nasdaq and S&P 500 touched their 2003's low. Stocks have slumped to 5-year low....
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BSE Block Deal
Hindustan Unilever 571175 Shares At 220.10 Inr, Stock Trading 6.83
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FM----------In the next 10 to 12 days substantial liquidity will be infused into the market: Finance Minister. Banks are well capitalized and deposits are safe, no need to worry about them, he adds
ET.............................
In reply to:
A L E R T !!!!!!!!!
Posted by : latikav
ALERT: Trading will halt for 1 hour if Sensex drops 1275 pts to 10,053.36 or Nifty goes down 390 pts (1229hrs)
ET...................
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1003
Vani,
Last ten days,one hour stoppage due to Sun outage
Today( if it happens) it would be due to FII` outrage!
Good luck...
In reply to:
A L E R T !!!!!!!!!
Posted by : latikav
ALERT: Trading will halt for 1 hour if Sensex drops 1275 pts to 10,053.36 or Nifty goes down 390 pts (1229hrs)
ET...................
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Worried investors in Indian equity markets hoping for a turn of sentiment in the global markets following coordinated rescue efforts by governments across the globe had little to cheer them on Thursday.
They were looking for some stability back home when the exchanges open for trading on Friday.
After Wednesday’s carnage, the Asian markets did show signs of recovery with the Hong Kong and Singapore indices registering a gain of over three per cent while the Japanese index Nikkei closed 0.5 per cent lower.
The major European markets also traded in the green for most part of the day, in response to rate cuts and good show by the IT major IBM.
The US markets also opened higher; however, very soon Dow fell sharply with Nasdaq too following suit after offering some resistance. This sent nervousness across the Atlantic and the European markets retraced their gains. By mid-day, the US indices had regained lost ground considerably, though still in the red.
Whether the market gains or loses, investors will have to live with volatility for some time to come, it appears.
Resilience
Despite the steep fall in the Indian indices, one can see an element of resilience on the part of retail investors, who have not panicked, unlike in past market crashes, said Mr C.J. George, Managing Director, Geojit Financial Services Ltd. “This is a positive sign. The current global financial turmoil is not of stock market origin; it is the fallout of the global credit market crisis.”
In the short term, the movement in Indian markets will depend mainly on global cues and FII activity, he added
The selling by foreign institutional investors was the major factor behind the 955-points fall of the Sensex on Wednesday, their net sales of equity amounting to Rs 1,055 crore. The Sensex was pulled up from its intra-day low of 10,740 as domestic financial institutions later stepped in, helping the market close above 11,000.
On the same day, central banks across the globe, led by US Federal Reserve and European Central Bank, cut interest rates by half a percentage point. The Chinese central bank too announced cuts in key interest rates.
On Thursday, the central banks of South Korea, Hong Kong and Taiwan followed suit, cutting interest rates. Bank of Japan announced an infusion of ¥4 trillion, equivalent to approximately $40 billion, in the money market.
Another stock market analyst said domestic institutions do not want to be aggressive on buying as this would further smoothen the exit route for FIIs, looking to seize the slightest opportunity to liquidate their positions.
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we already had chance of hitting circuit twice but it didn`t happen. don`t think there will be circuit. midcap index is already down 10%, so if circuit happens better for , at least midcap stock will be saved for 1 hour....
In reply to:
A L E R T !!!!!!!!!
Posted by : latikav
ALERT: Trading will halt for 1 hour if Sensex drops 1275 pts to 10,053.36 or Nifty goes down 390 pts (1229hrs)
ET...................
Tracked by: 0 Boarder
ALERT: Trading will halt for 1 hour if Sensex drops 1275 pts to 10,053.36 or Nifty goes down 390 pts (1229hrs)
ET......................
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BSE Block Deal
NUCLEUS SOFTWARE 1.03 MLN Shares, 3.18 Pct, At 82.25 Rupees Per Share
TATA CONSULTANCY SERVICES 126346 shares at 515.05
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NSE Block Deal
DR REDDY LABORATORIES 500002 Shares At 420
HDFC BANK 50026 Shares At 1025
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Poll
Udayan's Market Outlook
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Investors should stay in cash, not sell in panic | |
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| Udayan Mukherjee, Stocks Editor, TV18 | ||
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