DISASTER: India's Credit Rating downgrade

Finally, my fear of Credit rating downgrade due to nuclear issue is finally coming true. Read my original article "NUKE deal and India's credit rating....." dated 23-08-2008. After 22 days, my fears"ditto" is coming true. The article is reproduced after a few Para.

S&P released today that it might reduce India's credit rating from Investment grade to Junk grade. This will cause mass exodus of money from India. All pension funds, retirement funds, hedge funds will run for the exit because they are not authorized to invest into non-investment grade country.

S&P mentions the deteriorating fiscal discipline as one of the cause. But these credit rating companies are goddamn "Opportunist" and have always political agenda. They go by the dictates of the United States establishments.

By terming as "non investment grade". what they are telling you is that you are not friendly to the US government. Nearly 1/3rd reserve of India is also not parked with the US government - it is outside USA. These are not friendly signs for them. These are all untold reasons. You have to read what they mean rather than reading it in strict literary sense.

FII funds flow, especially long term investment money from US Pension funds were the main reasons for SENSEX's meteoric rise.

"Easy it comes, Easy it goes" said Danny DeVito in one his witty movies - OPM (Other People's Money).

Now those of Indians who have false pride of patriotism, I want to tell them once for all - This is not a war that you have to display your patriotism - this is financial world where you have got to be "realist" like me.

Expect SENSEX to fall very hard, and Indian rupees to go to Rs 48 at least if not 60.

Government of India was "IDIOT" . When the SENSEX rose to almost 21000, it had the perfect opportunity to sell various Public Sector Unit's stakes, realizing more than 400,000 crores. It could have then give the Tax benefit to the citizens after 50 years of hard work. But no, even Manmohan Singh and P Chidambaram are not visionary. They are good people, but very dumb. If they can not capitalize on screaming opportunities , they lose their right to leadership, I really wanted to use much stronger word, but would not.

Those of you aspiring for SENSEX to rise to 21000 or 40000 within next 3 years, forget it. Forget India's growth story - you need the capital but the SEBI, RBI, and Government of India has killed that very source. Sooner these bad guys leave the throne, better it is for India.

Here is my old article:
QUOTE
Title: NUKE deal and India's credit rating.....

United State's reminder to India to speed up the civilian Nuclear deal is a very serious warning having tremendous implications.

It may be noted that India's credit rating was upgraded to Investment grade only after Nuclear deal in principle. This caused exodus of US Pension Funds and other similar funds who are authorized to invest only in investment grade country.

If Nuke deal does not become a reality, there is serious risk to India for losing its investment grade status. If that happens, there will be mass exodus of Hedge and Pension funds from India. This will also push down Indian rupees to Rs 48 or further down, increasing the Oil Import bill by another 10%.

Indian growth story will be severely dented. It is important for all political parties to reconcile their differences and at least approve the deal so that catastrophe does not happen.

This will be the most important event. Watch for the early approval of the deal or rush to the exit gate to sell the stock at whatever the price. Recovery of stock market will be highly impossible, except for high tech stocks.

As hedge, stay with the high tech and BPO stocks. who will be least affected. Their fall from grace during such market meltdown will be the best buying opportunity.

Kalidas, Hong Kong
23-08-2008 (Ref: 09-061)
UNQUOTE

Kalidas, Hong Kong
14/07/2008 (Ref: 09-078)

18)

Totally disagree.

What Ambani Brothers' disputes have anything to do with the market? Their stocks have fropped due to (1) overrating and over valuation and (2) worsening global market. RIL stock is not worth Rs 900 - where is the question of it rising above 3000 as before. It was just hyped up.

Ambani brothers are coming up with newer and newer company all the time and then pass on the begging bowl around to raise money. I never like companies that go on inventing newer and newer companies. That is the first sign of financial trouble. Their almost all other new ventures have failed - Retails (vegetables), real estate, infrastructure etc etc

Have you ever heard solid company like IBM to go on buying totally diverse companies, not related to their field. IBM has even stopped advertising. 10 years ago, the IBL logo was found on every bus stand, water tank, street lights and every where. Today, IBM without any non repated take overs, and without advertising, earns more than what is used to earn before. This is called a Company, not RIL

Take the example of Apple. These are all single focused company. These Ambani brothers have become multi focused companies, one day they want Newspaper, or TV media (TV Today), then movie business (Spielberg association) or Cricket sponsorship or selling Vegatables like Bhaiyaas, then power plants, then telcom, then airport building, then Metro building, then real estate development, now they are eying Bank (because money dried up elsewhere). It is written all over it that this group has started Count down for its failure. Such companies do not last longer.

LT is a kind of stock should not trade at over 8 times PE and it is trading at 33 times. This is the most expensive stock one would have. Those who hold it or buy it should be rated as Fools. Watch for its downfall, if yu disagree. I will not buy this stock unleess it has come down to less than Rs 600 prebonus basis.

When these biggies are going to go down heavily, they will tank SENSEX or NIFTY accordingly. Between them, they will bring down index by 1800 points

Both are USELESS stocks to own. They are too pricey and too much diversified. Both are less focused. This is why LT lost over Rs 1400 crores in Forex losses. They are losing control of their operation - this is a warning light.

Kalidas, Hong Kong
15/7/08

19)

for novice1000

I disagree. US is also a growing market. Only growing markets can have rising stock market. US is a mixture of Innovation and also Commercialism. If US is also the biggest consumer nation in the world. If there is no US, neither China nor India will have any growth - their domestic market is too poor to pay the kind of price one gets in US. If US stops buying from China, 80% of factories will close down.

There is demand supply gap all the time every where. Apart from supply, you have to look at the quality as well. Can India make a simple passenger plane like Boeing? Can India make a Rail car (Dibba) like the one made by France and Germany? Can India make a metro like British did in Hong Kong and in UK?

Low prices encourage producers to make shoddy goods. It is only the presence of US, UK and Europe that people have conscious of quality. EU picks up from what is left by USA

EXXON, Royal Dutch Shell, British Petroleum, Total (France) never felt urge any need for diversification inspite of reaching the size nearly 3 to 10 times of Reliance.

Dhirubhai Ambani was innovative and also single focused. He did forward and backward integration, never went for diversication. He was single focused, so he succeeded. His MBA sons will fail, because such things are not taught in business schools.

Diversification is a much abused word. When one can not expand through innovation or runs out of idea, he borrows the idea of others and go for that business of which they have little knowledge.

This is called speculation. They call it diversifcation. It merely says that \\

20)
For guest,

Normally I do not reply to unidentified guests. It seems that you are either new, never read anything about my posts, do not know my timings, or nothing at all. It was me who said in December to sell 70% of stocks before 16/1/2008, and Index slumped by 3000 pts in 2 days from 23/1, Again I told everyone to sell everything before 31/3 and remain 100% cash. On 31/12/2007 and 28/3/2008, the index position were as under:
Date......Open......High.....Low.......Close.......Volume Adj Close*
31-Dec-07.20,323....20,484...20,239....20,286......10,400...20,286
28-Mar-08.16,100....16,452...15,884....16,371..... 23,800...16,371
Current
15-Jul-08.13,067....13,067...12,607....12,676......30,000...12,676

Now tell me, my calls were much ahead than others. SENSEX is down by 40% from the date of my first call. and 33% from second call. Check the facts before passing angry remarks. Everyone is losing if they are still long,that includes you, otherwise you would not have been so angry.

And when you say that 'The market or stocks are down due to poor politics here, poor global cues, high crude oil rates & high inflation rates', then let me ask you which factor is left out?

Don't be so naive, and do not tie me up with others in the animal farm. Read properly before you vent out your feelings.

Kalidas, Hong Kong


21)
for guest,

Pick any Investment Bank. When they are in distress, they merge with others. you will get the best experience in such banks. After two years or so, when the things begin to stabilize, you may get better oppportunities.

Kalidas, Hong Kong
16/7/2008

22)
for karthik (Guest)

Please make your enquiries specific. You are asking one question related to US and other buying some agricultural properties - in India or USA

Agricultural property prices are not falling to my knowledge. Further, it all depends on location, water availability etc.

Generally speaking, the Agricultural property prices are rising except those near city which were bought by investors for speculation purpose.

In USA the Ag land prices are rising, not falling. In India too, they are rising near the center where I have lot of farm interest.

Kalidas, Hong Kong
17/7/2008

23)
for Ranbir Mehta(Vododara) Posted By Guest

Yes, It will happen everywhere. More than stock market crash, there will be precipitate bank failures where people may lost lot of money. In some countries, including United States, there could be even Civil War.

Take protective measures if you are living in independent bungalow.

Kalidas, Hong Kong
18/7/2008

24)

for Jayesh Mange (Guest)

It is not the time to buy property in Mumbai. The prices have corrected in Ghatkopar (I was borne in Ghatkopar and have my property interest there) - especially in new constructions. In old Ghatkopar or on Ghatkopar (West) near 60'/90' Road or Garodia Nagar. the supply of vacant land is very limited. You can get only resale flats. There prices may not have come down.

Near Vidyavihar, where Punjalal Dave built property, where my own brother has bought for Rs 33 lakhs (@ Rs 2800/sft), the rates were said to have gone to Rs 8000/sft

In neighboring location, where Neelkanth group is building the new complex where booking rate was over Rs 7500, they have scaled down to Rs 6000 or so, one of the investor having relationship with the builder told me recently.

The interest rates are too high, and stock market is still very high. There should not be any rush to buy the property at this point of time. Let the market drop by another 6000 points and 3 months after that you search for the property - you may get about 25% cheaper from current level.

You are right. One BHK flat used to cost Rs 35 lakhs. only in old buildings, you may get between Rs 25 lakhs to Rs 30 lakhs now or may be less (these buildings do not have lift)

Kalidas, Hong Kong
18/7/2008