US shutdown opens new doors for India

It could potentially prove to be good as budding markets are doing well because of this crisis.

The US government has shutdown as the Republicans and the Democrats refused to move from their respective positions on the Obamacare– the flagship scheme of US President Barack Obama to provide health insurance to those without cover.

Its brunt- Around eight lakh government workers have to work without pay or go on a leave. Moreover, US soldiers will not be salaried as planned; only necessary services will be provided for, like the police, fire department, etc, while all non-essential services are halted.

How will US shutdown impact India for its good?

This shutdown will only heave ambiguity; US witnessed huge amount of outflow over the last eight weeks. India has actually started to go back into budding markets in September. While the US saw some growth, it does not look the same under present conditions which is automatically going to be a trend until the thing is resolved. Investors will pull out and the saving grace here is that budding markets are way oversold and that the US is going to see a lot of Q4 amendments to portfolios and some window dressing and that is going to augur well for emerging markets.

Can this event prove to be damaging for Indian markets?

The universal hope is that the political leaders will keep complaining, but after a point, they cannot afford a long-lasting shutdown. This is not the first time it’s happening, it has occurred many times in the past. Normally, the markets have sold off some few percentage points. The standard is around 3 percent sell-off in those 15-20 days when this lasts and then after that, the markets gradually recuperate. Thus, for most investors it is an impending concern, but it is not going to be long-standing as eventually they have to find a solution. No politician can afford to have a prolonged shutdown of the US.

It will not affect India Inc?

In will not affect Indian industries as they do not do much work for the federal government. This particular shutdown does not affect the state government where we do some work. So, there will not be any direct impact on the Indian business. Although, if this prolongs for a longer period of time, then there would certainly be some macroeconomic aspects that will affect and it will start impacting the rest of the industry.

How will it show on the movability of Indians to the US for work?

It would have very trivial impact but it is just about those people who are here and have applied for visas. But most of the companies have a bigger number of people there in the US; so, Indians will probably make through with them as business travel would become a little harder but certainly couple of weeks is something that could be beard without any impact for sorts on our business. But if it continues for months, then it will definitely be a problem.

Will it be good for Indian currency and companies?

It could potentially prove to be good as budding markets are doing well because of this crisis. This will have its effect on a lot of things, including the currency and the capability of Indian companies to raise equity and debts overseas. If you see return of this phenomenon, you could see to some degree, a self-fulfilling forecast where fund flows will help. This will optimistically clean up some balance sheets of Indian companies.

What kind of gains can the Indian stock markets anticipate?

India’s benchmark index, Sensex, saw some volatility in today’s trade, and was trading with gains of over 100 points at noon.

And why will Indian markets not see a positive sentiment as we have seen earlier that Sensex gained over 25 percent in 2012 when FIIs thronged budding markets such as India to look for higher profits when the developed markets were witnessing crisis.

What will come out if the US debt ceiling is not hiked?

America’s financial department will not be able to borrow more money to meet its debt requirements. There are greater chances it defaults on payments, something which Obama says will have deep destabilising effect.

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