Investors could diversify out of US bonds

Foreign exchange markets are bracing for heightened volatility on Monday morning as the reaction to Standard and Poor's lowering of US long-term sovereign credit rating to AA+ from AAA sets in.

It is obvious that global investors would consider diversifying their assets out of US treasuries. This move can apply pressure on the dollar. There is also fear that some funds which are not allowed to hold any asset without AAA rating might be forced to sell treasuries in the near term.

However, it is hard to envisage a total collapse of the greenback as no investor can claim that he was unaware of the state of the US economy or the risks associated with investing in dollar-denominated assets.

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Reason why US rating was downgraded

What is a downgrade?

Standard & Poor's, one of the three major credit rating agencies that assign scores to debt issued by institutions, municipalities, and governments, said there is a heightened degree of risk in holding debt issued by the United States. So it lowered its rating from the AAA, the highest possible level, by one notch to AA+. It also said the outlook is negative.

Why did it lower the rating?

The credit rating agency believes the outstanding debt of $14.3 trillion and projected deficits for coming years in the United States no longer warrant the top-tier rating that it had assigned to the United States since 1941. It also said that the political environment does not build confidence that the United States can agree on how to lower the deficit in a meaningful way any time soon.

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US Crisis to hamper growth

The downgrading of US sovereign rating will negatively impact exports and moderate capital flows into the country but overall economic growth will remain robust at 8.2%, said Prime Minister’s economic advisory council chairman (PMEAC) C. Rangarajan.

“More than the downgrade what will be the impact for India and the rest of the world will be the slow pace of recovery of the US. It will have implication for trade flow and capital flow,” Rangarajan told PTI.

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Middle East markets crash

Stocks tumbled across the Middle East on Sunday as most regional markets opened for their first day of business following a historic downgrade of the United States' credit rating.

Mideast markets mostly operate Sunday to Thursday. That makes them the first to react to credit rating agency Standard & Poor's decision late Friday to cut the U.S. level one notch to AA+ from its top AAA rating. The only exception is OPEC powerhouse Saudi Arabia, which plunged 5.5 percent when it opened Saturday.


The Dubai Financial Market's benchmark index suffered some of the steepest declines, plunging more than 5 percent in early trading before trimming its losses. The index was down 3.8 percent to 1,482 points by early afternoon.

While the S&P downgrade weighed on the market, it was also dragged lower by a lower than expected quarterly profit from Arabtec Holding, the Emirati construction giant that helped build the world's tallest tower in Dubai. Arabtec shares fell 4.9 percent to trade at 1.4 dirhams (38 cents).


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Weekly: Markets in bear grip, fall 5% on global meltdown

Investors remained jittery on fears of global economic recession alongwith high inflation and rising interest rates, with markets posting 5% weekly decline

Major news for the week

Food inflation at 8.04% versus 7.33%

India’s GDP to grow by 8.2% in FY12: PMEAC

India’s factory output falls to a 20-month low in July

Exports rise 46.45% to $29.21 billion in June

Bharti Airtel Q1 consolidated net profit down nearly 28%

Gold gains on safe haven buying

Gold prices advanced on Friday, recovering from the previous session's drop, as global investors continued to put their faith in the yellow metal amid fears of deteriorating economic conditions in the US and eurozone. Investors also bought gold as an alternative investment as risky assets like equities and commodities seem to have gone out of favour for the time being on concern about faltering global economic growth.

Weekly Stock Picks - Aug 7 2011

Buy Satyam Computer

Buy Jain Irrigation

Buy GAIL

Buy Indian Hotels

Buy Aurobindo Pharma

Weekly Newsletter - Aug 7 2011

Global events clearly overwhelmed the Indian markets. We didn’t fall as much as US and European markets did but still the fall was quite steep. The carnage was sparked by disappointing economic reports from various parts of the world. But, markets were particularly concerned about the signals coming out of the US. Even the clinching of the crucial US debt ceiling deal failed to lift the gloom.

World markets in turmoil on growth jitters

Equity markets across the globe went into a tailspin, as panicky investors scurried for cover amid fears that the US economy was slowing down and the eurozone credit crisis will deteriorate. The selloff across world markets came despite the US Congress clearing a crucial legislation to lift the debt ceiling before the Aug. 2 deadline. The undertone was hit by a series of downbeat economic reports pointing to a deceleration in the US economy. Also, Moody's and Fitch warned that US' coveted "AAA" rating was still in danger of being downgraded. Economic data from other pockets of the world too showed moderation in economic activity, especially in the manufacturing space.

Engineers India

Engineers India

S&P downgrades US ratings from AAA

Credit rating agency Standard & Poor's has downgraded the United States' credit rating from AAA for the first time since the ratings were initiated.

India Economics

India Economics

Aurobindo Pharma

Aurobindo Pharma

BSE Bulk Deals to Watch - Aug 5 2011

Deal Date Scrip Code Company Client Name Deal Type * Quantity Price **
5/8/2011 532397 Arms Paper SANGEETA AJAY GOENKA B 480432 10.00
5/8/2011 532397 Arms Paper MONICA TIBREWAL S 94000 10.00
5/8/2011 532397 Arms Paper LAXMIDEVI TIBREWAL S 386432 10.00
5/8/2011 523850 Axtel Inds DEEPINDER SINGH POONIAN B 42495 12.73
5/8/2011 530095 Bhagwandas Met GITA AGARWAL X B 40200 5.30

NSE Bulk Deals to Watch - Aug 5 2011

Date,Symbol,Security Name,Client Name,Buy/Sell,Quantity Traded,Trade Price / Wght. Avg. Price,Remarks
05-AUG-2011,ACROPETAL,Acropetal Tech Ltd,RAVI KUMAR D,BUY,606000,16.50,-
05-AUG-2011,ARSSINFRA,ARSS Infra Proj. Ltd,BNK SECURITIES PVT.LTD.,BUY,100000,382.55,-
05-AUG-2011,BAJAJHLDNG,Bajaj Holdings & Invs Ltd,JAMNALAL SONS PRIVATE LIMITED,BUY,900000,750.00,-
05-AUG-2011,CREWBOS,Crew B.O.S. Products Limi,MEHROTRA VIVEK LAKSHMINATH,BUY,85917,48.74,-
05-AUG-2011,DCHL,Deccan Chronicle Hold Ltd,DECCAN CHRONICLE HOLDINGS LTD - BUY BACK ORD-WRONG CODE,BUY,1257500,65.98,-