Black Monday – An Analysis

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Black Monday An Analysis
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Black Monday The biggest ever single day loss
in Indian Stock Market

• After the Chinese stock market suffered its
  biggest one day loss since 2007, plummeting
  8.5, 24th August 2015 saw a bloodbath in the
  stock market as the Indian Investor Wealth
  crashed by over Rs. 7 Lakh Crore.
• This is the result of a meltdown in the Chinese
  economy following the devaluation of the Yuan
• It is the biggest ever single day loss
  experienced in Indian Stock Market History.
• The Sensex lost over 1700 points and Indian Rupee
  fell to Rs. 66.7 to one US dollar, the lowest in
  the past two years.

Rs. 7 Lakh Crore Wiped off from Indian Investors
Wealth
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Great Fall of China A background Check

• Chinas benchmark Shanghai Composite Index fell
  8.5 to 3,209.91 at close on Monday, wiping out
  all its gains in 2015 as a result, a trillion got
  wiped off Chinas economy
• The sharpest fall in Chinas stocks since 2007
  came despite Beijings latest attempt to support
  the equity market, an announcement on Sunday that
  it would allow pension funds to invest 30 of
  their total net assets of over 547 billion in
  stocks which is in sharp contrast to India
• In the background of the current turmoil lies the
  unusual rise in Chinese markets for about a year
  until June, as investors, most of them ordinary
  Chinese, poured large sums of money into stocks,
  even though both growth and corporate profits
  were weak leading to classic bubble situation.
• The Chinese steel industry grew 11 times during
  the last 20 years, from 125 million in the
  mid-1990s - already more than its US and Japanese
  counterparts - to 1.1 billion tons today. Neither
  China, nor the world can use that much steel and
  the scaffold of the manufacturing sector would
  also collapse soon
• China's markets had gone up rapidly - by almost
  300 in the past one year - and it took just a
  few weeks to undo that rise.

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Chinese Stock Market Crash and its Global Effect

• The FTSE 100 (London) fell below the 6,000 mark
  for the first time since 2013, and Japan's
  Nikkei, the German DAX and France's CAC all
  followed suit in recording heavy losses.
• A hard landing for China could lead to much lower
  growth and inflation in the UK which, in turn,
  could potentially delay the first rate hike until
  2017 or beyond
• The decision on a US interest rate rise, which
  had widely expected to take place in September,
  could be on hold.
• Economies that count China as a first or second
  largest export partner include Australia, New
  Zealand, Brazil, Indonesia, Malaysia and South
  Africa are also expected to face the economic
  glitch

The Downfall was certainly not unprecedented
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What is Indias position amid crisis?

• Being another commodity guzzler, this economic
  scenario could be Indias best opportunity to
  become an investment destination.
• The challenge lies in increasing the countrys
  demand which is much below its potential and
  thereby triggering the economic growth.
• When it comes to China, its future depends
  largely on its shoppers not its exporters. Being
  a self sufficient country, China is not in a
  crisis yet which means India has both
  opportunities and challenges though it is
  reasonably immune to the present economic
  situation

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Raghuram Rajans View on Indian Economic Climate

• Our macroeconomic factors are under control as
  the economy is in much better position relative
  to many other economies.
• Stating that low current account deficit, fiscal
  deficit discipline, moderate inflation, low
  short-term foreign currency liabilities, and very
  sizeable base of forex reserves make our economy
  better-placed relative to many other countries,
  says Raghuram Rajan
• On Yuan devaluation, Rajan said the Chinese move
  is the result of the extraordinary monetary
  policies that been going on across the world. 

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Call To Action

• This is a very good time to scale up ones
  exposure to equity investments
• If you have not made any equity investments
  before, this is the best period to make a start.
• If you have exposure to only one or two asset
  classes like real estate and gold, this is a good
  time to diversify the portfolio.
• If you have existing investments that are not
  being monitored, this is a good time to
  consolidate existing investments, and align it to
  capture the evolving markets.

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