IMPACT OF GLOBAL ECONOMY

ON INDIAN STOCK MARKET

BSE BUILDING; BSE DISPLAYS SENSEX ; PEOPLE TRADING ATTHE BOMBAY STOCK EXCHANGE

BOMBAY STOCK EXCHANGE BSE Limited formerly known as Bombay Stock

Exchange (BSE) , is the oldest stock exchange in Asia. It is a stock exchange located on Dalal Street, Mumbai.

The equity market capitalization of the companies listed on the BSE was US$1 trillion (or Re :5526,99,93,920.3007) as of December 2011.

It the 6th largest stock exchange in Asia and the 14th largest in the world.

The BSE has the largest number of listed companies in the world.

As of March 2012, there are over 5,133 listed Indian companies and over 8,196 scrips on the stock exchange, the Bombay Stock Exchange has a significant trading volume.

The BSE SENSEX, also called "BSE 30", is a widely used market index in India and Asia.

Though many other exchanges exist, BSE and the National Stock Exchange of India account for the majority of the equity trading in India.

While both have similar total market capitalization (about USD 1.6 trillion), share volume in NSE is typically two times that of BSE.

NATIONAL STOCK

EXCHANGE , MUMBAI.

NATIONAL STOCK EXCHANGE

NATIONAL STOCK EXCHANGE

The National Stock Exchange (NSE) is stock exchange located at Mumbai, India.

It is the 16th largest stock exchange in the world by market capitalization and largest in India by daily turnover and number of trades, for both equities and derivative trading.

NSE has a market capitalization of around US 985 billion and over 1,646 listings as of December 2011.

NSE and BSE are the two most significant stock exchanges in India, and between them are responsible for the vast majority of share transactions.

The NSE's key index is the S&P CNX Nifty, known as the NSE NIFTY (National

Stock Exchange Fifty), an index of fifty major stocks weighted by market

capitalisation.

NSE is mutually owned by a set of leading financial institutions, banks, insurance

companies and other financial intermediaries in India but its ownership and

management operate as separate entities.

There are at least 2 foreign investors NYSE Euro next and Goldman Sachs who

have taken a stake in the NSE.

In 2011, NSE was the third largest stock exchange in the world in terms of the

number of contracts (1221 million) traded in equity derivatives.

It is the second fastest growing stock exchange in the world with a recorded

growth of 16.6%.

FINANCIAL CRISIS

Why the financial crisis of 2008 happened? The answer is simple: The housing bubble burst

(U.S.subprime mortgage crisis) Subprime lending means giving loans to people who may

have difficulty in maintaining the repayment schedule. These loans are characterized by higher interest rates, poor quality collateral, and less favorable terms in order to compensate for higher credit risk.

Example: Student loans in India are considered to be subprime.

CAUSES OF CRISIS

•Relaxation in lending regulations •Poor creditworthiness of borrowers

•Rising EMI due to higher interest costs •Borrowers Unable to pay

•Failure of Banks and Financial Institutions

IMPACT OF SUBPRIME CRISIS

Sub Prime Mortgage Crisis Collapse of Financial System Economic Crisis Job Loss Low consumer spending Recession Low Economic activities Very low GDP growth Poor Prosperity of the countries

GLOBAL IMPACTS OF THE CRISIS

Investors lost confidence in the stock

market. Consumer spending slowed down due to

lack of cash/ unwillingness. U.S.A’s economic condition affected the

global economy. World economy slipped into recession. Exports from China, Korea, Taiwan and India

decreased.

Diagrammatic representation

IMPACT ON INDIAN STOCK MARKET

FIIs pulled out of money from the Indian stock market

Public Sector Banks, viz. State Bank Of India, Bank Of Baroda, Canara Bank, Punjab National Bank etc did not have major exposure to credit derivatives market due to their limited overseas operations.

Stock market Crashed and BSE sensex crashed from 24000 level to 8000 level.

ICICI Bank incurred a loss of close to Rs.1000 Crores because of exposure to international securities market

SENSEX MOVEMENT DURING THE CRISIS

ROLE OF FII’S ON THIS CRISIS

REASONS OF INTERNAL GREECE CRISIS

Democratic government, Socialist population Welfare schemes Hiring of more Government jobs increase in of Government employees Salary Evasion of tax High taxes witch lead to high tax evasion loosing 30 billion Euros per year 36.6% of the gross government revenue

Government spending focused on consumption expenditure

Greek government expenditure approximately 104 billion Euros which is equal to 49% of the GDP

Large spending on Interest payment 20% of government revenues diverted into long term

investment expenditure Fraudulent Government and Fiscal Indiscipline Accumulated debts Secretly borrowing from Private and foreign investors to hide deficits Because of government borrowing supply for the private sector decreased

GREEK BUDGET DEFICIT

Rising debt levels 12.7% of GDP in 2009 Rising borrowing cost High social spending On 27 April 2010, the Greek debt rating was

decreased to BB+ by Standard & Poor Standard & Poor's estimates that in the event of default

investors would fail to get 30–50% of their money back

The crisis has reduced confidence in other European economies

Financing needs for the euro zone in 2010 come to a total of €1.6 trillion

Ireland, with a government deficit in 2010 of 32.4% of GDP, Spain with 9.2%, and Portugal

IMPACT ON INDIA STOCK MARKET

Greek imports from India include cotton, synthetic fibers, fabrics, vehicles, iron, steel and fruit.

while Greek exports to India include fibers, fertilizers, organic chemicals, pharmaceutical products, leather goods, metal processing machinery, etc.

Only 0.05% of India's exports go to Greece and Indian banks have virtually no direct exposure to Greece.

There will be some additional capital flows coming in in search of a safe haven and a small drop in exports.

Euro which was quoting at around Rs.67 before crisis is way below at Rs.55.92 currently.

Impacts on Indian Trade: 10 billion C.A.D Forgien exchange reserves depleting to 53 billion.

Impact on India’s export: décline 15% in 08. imports grew by $6.1billion to $21.5 billion.

Impact on jewelry, handloom and tourism• 50,000 artisans lost their jobs.• 4.6% drop in handloom exports. • 8% to 10% dip in tourism.

EFFECTS OF DECLINED RATING

Stock market and Euro currency declined The euro declined by 1.6 % to $1.3175 The dollar jumped 1% on a trade-

weighted basis on haven flows The yield of the Greek two-year bond

reached 15.3%

Global growth prospects

The global economy continued to expand during 2014 at a moderate and uneven pace, as the prolonged recovery process from the global financial crisis was still saddled with unfinished post-crisis adjustments. Global recovery was also hampered by some new challenges, including a number of unexpected shocks, such as the heightened geopolitical conflicts in various areas of the world. Growth of world gross product (WGP) is estimated to be 2.6 per cent in 2014, marginally better than the growth of 2.5 per cent registered in 2013, but lower than the 2.9 per cent projected in World economic situation and prospects as of mid-2014.

.

Prospects for the world economy in 2015–2016