The Hindu Business Line : It takes two (results) to tango

Jogin (a student), Bidyut (an economics professor) and Divya (a journalist) wait for Mack (an American expat working in India) to return from a check-up after his recent visit to Mexico. The Moody’s report that swine flu could make Indian equities lose foreign investors’ money catches Jogin’s eyes.

Jogin: Do you really think FIIs would leave India

because of the swine flu outbreak? I mean, on the one

hand they sing about the Indian growth story and on the

other, they run because of a global flu outbreak?

Bidyut: As long as the flu does not spread in India,

FII exit is remote. I don’t think the situation warrants

an outflow yet.

Divya: Even if they wanted to run, where would they

go? With the way equities have been behaving world

over, I think India would be a better bet for FIIs.

Jogin: But the Sensex has been swinging because

of FII moves.

Bidyut: I think the exits have been to buy lower.

After all, stocks have been available at attractive

valuations and no shrewd investor would want

to miss the opportunity …

(The conversation trails off as Mack enters)

Divya: So, what is the verdict? Should we keep

away from you?

Mack: Even if you should it need not be because of the

flu. All clear, the doctors have said.

Jogin: Even swine virus does not want you?

What a pity!

Mack: For once, I am glad to be rejected. Man, the wait

for the results was stressful.

Divya: Talking about stress, I wonder why the results

of the stress tests are being held back. The conceivable

reason for holding back such a result would be bad

news. If it was even neutral news, it would have been

made public with much fanfare, given the recent

avalanche of dreadful news.

Bidyut: I agree, reading the results of the stress test

would be like reading a horror novel.

Mack: But the wait has been eventful. Three more

small US banks were closed since May 1. This means

32 banks have shut shop in 2009.

Bidyut: If the test results say the banks need more

capital, I wonder from where the money would

be brought it. I hope no regulation is passed in the

US making investments abroad less lucrative.

Under such a circumstance, FII exit would be huge.

Divya: But several Indian banks have posted enormous

profits. I am sure the results of the behemoth, SBI,

would be the icing on the cake.

Mack: SBI must be very comfortable as it has

announced a rate cut.

Jogin: In the meantime we have our own stress test

results to think about. Election results.

Mack: There is talk that everyone is waiting for the

new government to be formed before making

investment decisions.

Bidyut: I don’t think the big investors would wait for

long. But the small investors would be better off staying

put for the next couple of weeks, unless of course stock

prices become too tempting.

Mack: At least realty stocks wouldn’t be attractive

for some time, not after DLF’s poor results.

Divya: Don’t forget export companies, as exports have

shrunk for the sixth month. And for March it has

been a record 33 per cent decline.

Jogin: Well, more stressful times ahead then with the

wait on for the stress test and election results.

Ram with inputs from Badri

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