Markets see major sell off .India is not an island and will not remain isolated from the global selloff.
The Asian markets on Tuesday started on a strong note , however there a sell off in the Indian market at late afternoon once the European markets opened gap down .
We expected the markets to remain stable in absence of any news flow from the international markets . However the news from German carmaker Volkswagen made the market crash .Volkswagen has announced that it will make a provision of $7.3 billion in the third quarter following the revelations that it had misled authorities over the emissions of its diesel cars. This lead to a major sell off in the european markets which also affected the Indian markets.
The party lead by Fed's inaction was short lived and the market is trying to price is bad news from Germany . Some of the questions that has been raised by this episode are as follows :
Back in India on a smaller scale Amtek Auto defaulted on 800 crore bond payment . Amtek Auto is one of the most leveraged company in the automobile sector. The banks in India has an exposure of close to 8000 crore on Ametek and its group companies. . Indian banking has a huge exposure to the auto components sector . Amtek Auto was rated highly by the credit rating companies even a few months back . Does our credit rating systems has some flaws that stops them from foreseeing such problems or .
does it point towards conflict of interest.
This problem is much beyond Amtek group . We will see sell off and derating of many highly leveraged companies in days to come . Many of these companies has poor corporate governance and huge intergroup transactions. It will be a good idea to take profits / book losses and move out of all such companies to protect your portfolio.
The commonalities in the above mentioned incidents are that both relate to the automobile sector , and both indicates some lapses from concerned authorities.
China date keeps pointing to a much widespread and deeper slowdown than initially anticipated , The market is yet to price in this .
On INR VS USD , INR will continue to weaken in line with other Asian Currencies . India is not an island and will not remain isolated from the global selloff.