Adwait:Sir, will it affect market in India?
Haresh Soneji: Yes, it definitely will. Remember, the bull run in India was backed by excess FII liquidity. Considering the worsening situation in US/Europe, this liquidity will dryup. A simple factor is the short rally in India from July 16 lows. It was minus FII and MF flows. It was speculative hence was sold into very fast. Till the time FII don't turn net buyers, sell into every rally.
Vikas:Considering ICICI Bank has exposure to Lehman, should this stock be sold at the price of around Rs 550 or accumulated?
Haresh Soneji: ICICI Bank was the darling of the bull market. At the end of the day you have to seen the correction in the stock in light of the rally it had before this. I won't be surprised if the stock falls further to around Rs 500 valuations ought to be normalised.
Murugesan:How about Lehmans exposure to India?
Haresh Soneji: Lehman's exposure to India is very negligible. It holds some Rs 350 crore through P-Notes, which will be transferred to another client. So ideally no impact on these. It holds some Rs 400 crore through proprietary books. This would be up for selling sooner rather than later.
Antariksh:India has ties with European countries too. How shall the US crisis be affecting the major developed countries of Europe?
Haresh Soneji: Europe is also facing similar crises. A world slow down led by US and Europe is what we have entered into. Thankfully, India is not an export-dominated economy like our Asian peers. To that extent, India is resilient.
Sangita:First and foremost I wanted to understand what caused the downfall of such a huge organisation apart from the US Sub-prime crisis? And you do see this affecting the Indian markets and industries?
Haresh Soneji: Excessive leveraging caused the downfall. Leveraging is like a house built on a pack of cards. It just collapses. Indian equity market will definitely be affected. The Indian Sensex has a strong correlation of tracking the Dow. The Dow has breached the July 15 lows and inched lower with all time high volumes. We would be headed lower soon. Remember, short term movements has nothing to do with fundamentals. Its just sentiments. As far as industries go, a few such as IT, banks and export oriented businesses.
Raghavendra: Does global credit crunch has affect on Indian bankers?
Haresh Soneji:: Indian banks with exposure to US/Europe markets with derivative positions will be forced to book MTM losses. ICICI Bank is one such example. It will definitely impact them. Bankers, I don’t know.
Danybuy: Is it an end of bad times or the worst is yet to come? Is it going to be very bad for Indian industry?
Haresh Soneji: We maybe somewhere in the middle. Indian industry is facing its own problems - rising interest and input costs and falling volumes. All incremental addition to topline is price growth and little volume growth. Also, soon they wouldn’t be able to pass on increasing costs to customers entirely. Several industries such as auto, retail are facing such issues.
Vinod:Haresh, I have been following your analyses for some time now. I want to know how should we decipher the present meltdown in Wall street in terms of the decoupling theory?
Haresh Soneji: Thank you. There is still blood left in the markets. India is not isolated to the Wall Street happenings. FIIs brought the liquidity to our equity that pushed up valuation and risk premiums. These will thin down. India growth story remains. Only postponed. Every bull market has a sector which is a clear outperformer. Search for the next big thing.
N.Sudharsanam: Whether this creates a more economic slowdown in India, If it is so which fields face the same?
Haresh Soneji: Yes. FDI will slow down. India is dependent on FDI to grow faster.
Dipak: Sir, your story on the 8th year itch was probably the 1st ones to come out in media. What is your prognosis of how much would the impact of the US crisis have on markets & employment in the immediate future?
Haresh Soneji: A supporting model to our CNBC TV18s 8-year cycle is the Presidential election cycle. The cycle suggests that US market bottoms out 1.8 year into the presidential term. And the Sensex closely mirrors the Dow. Corporates keep saying there is shortage of quality staff. So, people will keep getting employment.
Lance: Since Lehman has stake in quite a few Indian companies, would their share value erode or would the promoters do a buy back to salvage the situation?
Haresh Soneji: Indian promoters must have the cash to buy back. Till the time they don't announce anything specific, Lehman's proprietary holdings will be sold in the market. but, its prop book is negligible at some Rs 400 crore.
Nishi Aggarwal:Do you think America will be able to bounce back anytime soon?
Haresh Soneji: I'm a no US expert. But, I’m a big fan of Warren Buffett. He doesn't think that US would bounce back anytime soon.
Chetan Solanki: Is this the foundation stone for the replay of the GREAT DEPRESSION of 1929?
Haresh Soneji: I'm current reading about that great depression. yes, US is in a financial mess. But, the only issue is that it owes so much to the world that very few countries would want US to go burst. So, its a Cacth-22.
Shashipalreddy: if Obama won us elections is he going to stop outsourcing to India. and how it will effect on Indian software market?
Haresh Soneji: I don’t think anybody can stop outsourcing to India. As long as there is cost advantage, Indian companies will keep getting orders.
Sthakran:How does it affect the small and mid-size businesses that seek VC/PE money. I have been reading that investors are pulling out their money out of Indian Market?
Haresh Soneji: VC/PE kitty is drying up. The last forum I attended on VC/PE, there were so many of them from both sides - VC/PE and promoters. The promoters wanted high valuations which they saw before the bull market ended (Jan '08), but the VC/PE guys were ready to give much lower. So, the deals were left in abeyance. Small and mid size companies will see more pain.
Akhil:What makes Goldman Sach and Morgan Stanley different than Lehman Brother and Merrill Lynch? How are they able to survive despite heavy fall in their profit?
Haresh Soneji: They are all different till they fall. They all fall on the basis of perception and lack of trust. More seriously, its the extent of leveraged balance sheets.
Harish Kumar: What will happen about the job prospects within the Investment Banking Industry ? Both in India and abroad.
Haresh Soneji: Just heard, Mumbai's top recruiters got over 300 middle level CVs in one day.
Antarikrishnan:Is this credit crunch because of bad politics in the US financial market? Can this be mirrored in the Indian markets too. Does the Indian government have any rules in this regard?
Haresh Soneji: Not bad politics, but bad policies. Yes, it can be mirrored in India.
Ajay khudania: Do you think it is the right time to enter the markets - and which sectors?
Haresh Soneji: Nobody can time the market. If you are a systematic investor, bad phases are right time to plough monies into the equity market. The previous bull market (April'03-Jan '08) is over. Every bull market has its own leaders in terms of sectors. The search for the next big thing should now be on. I am no fan of direct investing.
Antariksh:You said that India is not export dominated country, but the majority of the difference between export-import is due to high cost of Oil import we face. I feel India is not that resilient as you are expecting/forecasting.
Haresh Soneji: Look at the Asian peers. They are completely dependant on exports. India is not. To that extent we are resilient. Therefore we get a higher risk premium to other Asian peers.
Rohit Gupta:Would you say that the turmoil could be a blessing in disguise for the Indian markets?
Haresh Soneji: All turmoils are blessings for the patient investor. The question is how long are you ready to wait.
Indira: Would not the falling out of global majors affect Indian IT and ITES industry as definitely 40-50 per cent of India's revenues for IT sector comes in from Foreign sector and Banking and eventually it will trigger slow down of Indian economy too?,
Haresh Soneji: Agreed.
Preetam: Sir, many of these troubled American companies have operations in, India? If they are bankrupt in US what happens to their Indian operations? What about there Indian assets?
Haresh Soneji: US laws have various bankruptcy laws. If the organisation is completely bankrupt, it has to sell off assets to repay losses/creditors.
Vijay Kumar K: How far will Sensex and Nifty go due to all this mess in the world. Sensex below 10,000 and Nifty below 3000 is a possibility that you see?
Haresh Soneji: Pls read CNBC TV18s 8-year equity market cycle. You will get your answers.
Ask:do you see equities heading southwards?
Haresh Soneji: from here, the risk rewards ratio are more skewed towards rewards. for that to happen though you have to be a patient, systematic investor. returns will come over the normal curve.
G Srinivashan:Like to know the impact of Sub Prime Problem in Indian Financial Sector, in particular, New Generation Banks.
Haresh Soneji:Banks who are exposed to foreign paper and derivatives will have impact to the extent they are exposed and/or leveraged.
Bhushan:What made AIG credit rating to go down?
Haresh Soneji: Not well capitalised. Its got the required infusion now.
Vikas:Why Unitech is also getting so much beating. Presently this stock is trading for around Rs 130. Should it be accumulated at this price or sold?
Haresh Soneji: Lehman was supposed to invest in Unitech's Mumbai projects. Unitech may not get these now.
Mohan Menon:How do you see the PMS providers performing in this scenario where the outlook seems to be one ranging from guarded optimism to Cassandra like extremist views which speaks of a second bubbleburst after the 1929 one?
Haresh Soneji: My PMS friends tell me how they are getting hit from across. for a few months now they have under performed the market. to top that there are redemption pressures.
Antariksh:What’s the reason for the dollar rate increase? It doesn’t make any sense as to markets crashing and dollar rising.
Haresh Soneji:Due to the worsening situation in the West, FIIs are selling across the world to balance their positions and pay for redemptions. India doesn’t want to allow money to move out. Depreciating the rupee would give lesser dollars as and when they want to exit. Makes a lot of sense.
Sandeep: Am a big fan of your and Mr Udayan Mukherjee. As a small time investor should I listen to the doomsayers who are writing off Indian stocks? I am holding IFCI and RNRL. Please advice. I am confused with all the hoopla. Should I believe the analysts on newspapers and TV?
Haresh Soneji: Nobody can time the market. I am not a big fan of direct investing until its your profession. Every expert has his/her own way of thinking. use your discretion before ploughing your hard earned money to work.
Hariharan:Why didn't the US Government come forward to help Lehman by lending loan, like they are helping now for AIG?
Haresh Soneji: Investment bank is not as important as an insurance company. The impact on an insurer going burst is significant.
Arti:Morgan Stanley is thinking of merging with another company which will mean more job cuts I guess...how long will this bad situation in job market continue?..when will the market stabilise?
Haresh Soneji: Wish I was God. Things are bad. How bad they can get? I don’t know. Hopefully, there's light at the end of the tunnel.
Rohit Gupta:With so much money being pumped into the US system by the Fed ($900 billion) do u think the US is creating more trouble for future years?
Haresh Soneji: I believe that the US is in an election year. so, they cannot announce afford the economy to sharply fall off or the elections would be a one sided affair. Once the election results are out, we might get a more clear picture
Pankaj Purohit:Is there any news of ICICI bank getting effected because of Global Financial Crisis?
Haresh Soneji: Yes. they came on record to say the extent of their exposures to sub prime, Lehman etc etc.
Subash:Seeing this do you see a possibility of a company like Reliance also going bankrupt in India?
Haresh Soneji: Reliance is a classic case of what people think - too big to fail. but, anything can happen.
khan: Sir, should small time traders get out of market or stay invested for long term?
Haresh Soneji: Traders vs investors. the question is confusing. if your a trader, you should love the volatility. if your an investor, stay put.
Anagh:What is the positive we can take from the current market.
Haresh Soneji:Your getting an opportunity to invest systematically all over again.
Yogesh PJ: Let me know in short, whether we it is the right time to start investing in SIP?
Haresh Soneji: Yes.
JN:Can we expect a bull run in the near term? As many of the investors/mutual funds would have exited the market and would be left with lot of funds. If so will be moving towards fundamentally strong stock? Can you suggest few stocks or sectors at least?
Haresh Soneji: The Indian retail investor is the last one to enter a bull market and exit a bear market. the last leg of the sell off would be ideally seen by retailers pulling out money from MFs. valuations and risk premiums are getting rationalised. a fundamentally strong stock could see sell off too.
shan:How many more institutions Federal bank can save sir? As to me it seems they are nationalizing things?
Haresh Soneji: Fed has all the money in the world. It just has to borrow from us - developing countries.
Somu:Are there any financial / Insurance institutions in India which are likely to go under the table on the lines of Bear sterns, ML & AIG
Haresh Soneji: Insurance companies in India have strong capital adequacy norms. financial institutions that have excessive leverage could go belly up/
Ramachandran:What is the status of ICICI Bank? Many rumors are going on about its survival? Whether LB has indirect investments on ICICI?
Haresh Soneji: There are no survival issues. it has some exposure to sub prime paper and derivative exposure. the hit would be to that extent
Pinky Khatri:Do you think RBI introduce strict policy measures in the financial sector keeping in mind the current situation in the US?
Haresh Soneji: RBI seems to be fighting its own battle by doing the Impossible Trinity. some issues here and there, but overall India's financial sector are strongly and adequately regulated by RBI. no issues there.
Arun Bulbule:Do we have any kind of policies to save guard the Indian employees.
Haresh Soneji: If the company goes bust, I am afraid there cannot be and policies forcing the employer to continue to retain staff.
Pinky Khatri:What will be impact on real estate sector in India? Due you think property prices will undergo corrections?
Haresh Soneji: I'm a strong believer that realty will see correction. prices are artificially pegged high. but the crack is visible. investors who booked flats were called everyday if they wanted to re-sell their flats and profit. Those calls have stopped. several builders are believed to be taking money from the market at exorbitant rates.
WP:At the height of the irrational exuberance of the West & some Indian players also towards derivatives & real estate, former RBI Governor Reddy took steps tightening the funding to those areas - capita adequacy norms, interest rates, etc. Though he was criticised then, on hindsight do you think he has saved India from going the USA way?
Haresh Soneji: India was fighting against the Impossible Trinity. we achieved some, we lost some. but overall we fared well.
Rohit Gupta:Everybody talks with a historical perspective but do you think that history is being created here. Would you agree to the fact that this scenario will continue for 2-3 years as this is the flux time when the developing economies will accelerate to take over the developed economies.
Haresh Soneji: The India growth story remains strong. its just delayed. believe in the India growth story and be invested. this century is ours.
Jayakumar:Will this crisis may affect any Citi corp operations in India anyway?
Haresh Soneji: There are various rumors in the market. till the time its not in the public domain, pls don’t believe any of them.
Somu:Do you expect a subprime crisis in India with a few of the Indian reality companies already looking out for PE money which is difficult to come?
Haresh Soneji: No. Not really.
Amish:What is the time frame that we are looking at before this fiasco cools down, and the losses recovered. It was IT first, then this subprime, what would be next the Engineering Services in the way they are building up.
Haresh Soneji: Irrational exuberance surely has to end somewhere. i personally do not know if it would be engineering services or something else.
wp:why is my question not coming - At the height of the irrational exuberance of the West & some Indian players also towards derivatives & real estate, former RBI Governor Reddy took steps tightening the funding to those areas - capita adequacy norms, interest rates, etc. Though he was criticised then, on hindsight do you think he has saved India from going the USA way?
Haresh Soneji: Guess I answered this earlier
VARUN:Lehman brothers were bankrupt in 48 hrs.Weren't they aware of the present situation so that they could take any drastic measures?
Haresh Soneji: they should have been. they maybe just praying for the rain to go and the sun to shine. but unfortunately their umbrella gave way before the sun could shine.
Sumit:Do you think credit default swaps are the next big thing that will affect the markets.
Haresh Soneji: The search for the next big thing is on in the market. it may be as likely as it may be not.
Karun:Hi I had invested money in KPIT Cummins where Lehman had a stake. What would be your advice on the same?
Haresh Soneji: Look at the fundamentals on the company. if you think they are good, some selling by institutions will not affect in the long term.
Shravan:Do you see positive returns one year down the lane?
Haresh Soneji: CNBC TV18s 8-year equity cycle coupled with the Presidential Cycle will give you your answer. India's growth story remains. it just got postponed.
Sanjay Vishnu:Will other currencies like Euro and Yen also depreciate or appreciate ? Reason?
Haresh Soneji: It all depends on how fast their economy slows down
Karun:Hi I have invested money in Geometric and KPIT cummins where LB also had stake in the last few months both the stocks have tanked. Any advise on the same?
Haresh Soneji: If you believe in the fundamentals of the company, stay put as an investor. Some selling on account of exposure to LB would push the stock price down, but fundamentals will rule, at the end of the day.
ALOK TOMAR:Sir, how much stake does Indian investment and insurance sector has in US economy. Are we looking at a new adjustment in dollar rates and hence the slow down in export revenue?
Haresh Soneji: The West is slowing down. so export revenue has to slow down. I am sorry I don’t have access to Indian investment abroad at this point in time
Ramachandran: Your views on Market economy with Capitalist ICON American corporates seeking Federal help when in crisis especially to cover senior management inefficiencies. Does this encourage Cow Boy execs to indulge in more risks?
Haresh Soneji: The Fed decides who to bail out and who not to.
Bharatkumar Bhatt: When does this oil prices come down and when does us dollar come to 39 rupees level, this is a vacuum created among the trading communities this should end, as when u do expect this.
Haresh Soneji: India does not want monies to be moved out of the country. to that extent its allowing the rupee to depreciate. As when things normalise, we would see rupee at reasonable levels.
Jaskaran:Which will be next bank in queue for bankruptcy?
Haresh Soneji: I am no God buddy.
Amit Varma:Will it be worth beginning a career in this field for a fresh MBA student? Will we be able it make it big in this industry, especially who want to join in the Investment Banking Sector.
Haresh Soneji: Sure will. All experiences count. You starting at a bad phase. So you will see the good side of life later on unlike the unlucky ones who started in the bull period.
wp:You have been mentioning impossible trinity. What are those?
Haresh Soneji: The Impossible Trinity (also known as the Inconsistent Trinity, Triangle of Impossibility or Unholy Trinity) is the hypothesis in international economics that it is impossible to have all three of the following at the same time: A fixed exchange rate Free capital movement An independent monetary policy
Tejvir:Is India facing its biggest financial crisis?
Haresh Soneji: Not at this point in time.
Shashi:How will this affect ITES industry who are not at all into finance & investment domain?
Haresh Soneji: To the extent they do business with the companies that are going burst and to the extent companies in west decide to slowdown on IT spends.
Rajesh:Is this the correct time to invest and .... for short term of 3 to 6 months.
Haresh Soneji: Investing is not for the short term my friend. if you can afford a longer horizon of say 5 years minimum, start investing systematically. Not at one go. remember, no one can time the market.
Rohit Gupta:Why is nobody downgrading US sovereign rating? When we tried to manage our own small 'subprime' crises in the form of farm loans we were downgraded. Do you think we should continue to have same level of faith on rating agencies?
Haresh Soneji: Nobody can afford to downgrade US. Its living off debts from us countries. if US is downgraded, some countries will go burst.
Sundar:How the global financial crisis affect the Indian software industry?
Haresh Soneji: Just answered a couple of questions back
E R N Phani:Around this time India is adopting Basel II Norms for Banking sector. American and EU Nations adopted similar norms years ago. Even then their banks are tumbling. What is lacking?
Haresh Soneji: Law breakers always work a step ahead law makers. catching up is what is lacking.
Deathtrap:Do you think this financial turmoil will take as long as the Japanese crisis in the early 90s to settle.
Haresh Soneji: Once its over, we maybe in a position to analyse. not until then.
wp:Would LB be allowed by India to liquidate its assets here & clear its positions in USA without clearing dues to Indian operations?
Haresh Soneji: Indian assets may pay off indian debts. hopefully.
Sachin:Is there anything that a common man can do to improve the situation, or will he just be the sufferer?
Haresh Soneji: A common man can get more educated. and if its not his/her profession to invest, stay away from investing directly. Opt a professional fund manager
Ashish:Going by the previous cycles of recession, how long do you think the current global recession cycle would last? Are there any sectors totally shielded from it?
Haresh Soneji: I don't think there could be any sectors with a complete shield. recessionary cycles usually are less than a 12-15 months.
wp:It has been reported that the top management of Lehman held an investor conference a few days before & there was no mention of the crisis. Apart from other issues, does this also indicate a failure of corporate governance?
Haresh Soneji: They were looking at various funding options. when it didn’t work out, they finally couldn’t go any longer.
wp:Do you agree that one of the reasons for sub prime crisis not affecting India is that a lot of property gets sold with part cash (black) so the actual cost of purchase is much more than on paper.
Haresh Soneji: Not at all.
Somu:Do you expect the property prices to drop. If yes by what percentage (approximate)
Haresh Soneji: I strongly believe they should move down. how much, i don’t know. I wish it was 50%. but as Shakespeare said, "If wishes were horses, beggars would ride."
Chetan Solanki:If this situation weakens and The American federal Reserve bank gives loans to huge companies, is there any possibility of US turning into Russia, Cashless but technologically efficient country... and sell weapons to maintain the economy.
Haresh Soneji: Yes they could.
Anupam: Sir, despite having a significant exposure to the toxic assets, big financial conglomerates like Citi, Bank of America has been able to survive probably because they have huge diversified arms which runs through commercial banks, credit cards, etc. Does it mean, in future the financial industry will move towards a consolidation of its services?
Haresh Soneji: Diversification into similar businesses is good for an organisation. industry could consolidate, not services
Jayapradeep Jiothis:There is a general sense that such a financial shock and crisis can be used by many free market economists and corporations to push their agendas forward (like more liberal labour policies , government bailouts for sick corporations). Do u see that happening?
Haresh Soneji: I don't thing that’s true.
Jayapradeep Jiothis:With the kind of crazy retail lending our new generation financial institutions are into and the over valuation in our real estate markets. DO you think even we are over leveraged and there is an impending credit crisis.
Haresh Soneji: Not as large enough. If property prices drop drastically, investors would turn to banks and throw their hands up. then we could see some crises.
wp:The senior management has earned enough not to have to work again. The brunt is being borne by the lower level guys. Does this call for better performance management/ pay equations at the top?
Haresh Soneji: Lower level guys can start work again. I am sure there are enough takers for ex-Lehman, ml guys
Akash:When do you expect Indian markets to become stable again? I believe i should hold my portfolio till next February what say?
Haresh Soneji: Warren Buffett says, "Our favourite holding period is forever." i follow him. I think you must too.
Neepa:Is Rupee going to recover against dollar?
Haresh Soneji: Yes, it has to and it will.
Gurubasavaraja G:Haresh, when would you see the Wall street bouncing back from the current recession? Is it a possibility in the near future?
Haresh Soneji: The US Presidential cycle shows that US equity market bottoms out 1.8 years into the Presidential term.
Rohit Gupta:Haresh, would you still believe in your 8 year model as this crisis is being called the worse since 1929? if yes would request you to elaborate. Thanx for all the effort.
Haresh Soneji: The CNBC Tv18 8-year model held its forte when everyone in the equity market was bullish. i continue to believe in the same.
Sachin:From the time of Great Depression-1929, US has been a major role player, why is it still the same? Does other majors like China do not have any role?
Haresh Soneji: China is getting there. This century is ours. Some day, India and China will rule the world, if we don’t mess up anywhere. Thank you all. Hope i was able to clear at least some clouds. Thank you very much.
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