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ABSTRACT -
Prior to crisis the financial market in U.S. and
other major economies of the world had been
growing at a rapid rate. Investors of all types
that is both the small savings of household and
large corporate savings have been able to
mobilize their savings and earned a lot
investing through capital market. Various type
of sectoral funding agencies had been
operating to facilitate those movements and
help the borrowers in getting their
requirement financed.
However, with the advent of subprime
crisis that generally refers to situation that
resulted from the borrowing defaults on
subprime lenders. This type of lending was
advanced mostly by the mortgage funding
agencies. However as long as situation in both
the market i.e. capital market and property
market remained tacit the things were okay.
With time the house prices initially rising and
than falling these agencies started making
huge losses on account of defaulting loans and
decreasing prices and decreasing prices of
mortgaged houses. This led to credit crunch for
other sector thus the whole financial market
came under this grip. Also recently some of the
America’s top investment banks like Lehman
Brothers, Merill Lynch, Wachovia also started
falling as the assets valuation began to
decrease and liabilities rose for these
institutions.
This economic imbalance first hit the
financial sector, then the credit sector, then the
whole of capital sector.
3.Spread of Crisis
6.Impact on India
Since Indian market is still in its nascent stage of
growth with relatively less exposure to
international credit market. Thus, the trade
analysis and the policymakers believe that the
financial crisis in the U.S. will have limited impact
on Indian Market.
The recent turnmoil in the financial
markets weakened dollar in terms of major
currencies. However, after the spread of the crisis
in other major capital markets, the dollar value
strengthened again.
Some of the leading banks of India those
invested abroad in debt and security markets will
be hit by the crisis. ICICI, HDFC (Companies whose
shares are listed in NASDAQ and NEW YORK Stock
Exchange.)
Some of the Indian companies that are
listed in the New York Stock Exchange are
Dr.Reddy’s Laboratories Limited, GenPact Ltd,
HDFC, ICICI, MTNL, Satyam, Sterlite Industries Ltd,
Wipro, WNS, Tata Communication Ltd, Tata Motors
Ltd.
7. Conclusion
Even if the banks are safe (though there is no
definite guarantee) there are many other
institutions, varying from hedge and mutual funds
to pension funds, that have suffered huge loses,
both from the subprime fiasco and the stock
market crash, eroding the wealth of many. Housing
prices are still falling. The effect of that wealth
erosion on investment and consumption demand
are only now unraveling, indicating that there is
much to be hold in this story. What may be
necessary is one step more the refinancing of
mortgages to stop the foreclosures that underline
the financial crisis.