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The global meltdown in financial market has arrised a series of chain reactions in India, but the impact is not going to be as widespread as earlier imagined. Noted that global financial gaint Lehman ( which was supposed sometime , it can save any bankcrupt companies by giving his valuable advice.. ), but what happen to U.S forth largest bank now itself is on Sale !! yes on Sale... Lehman North America's Investment banking and brokerage is sold to Barclays, now Lehman India operation which is a mainly a back office operation of Lehman based in Mumbai has more than 2,000 employees and handle the investment bank’s information technology and R&D activities is also on sale. Japanese financial services major Nomura Holdings is all set to buy the Indian operations of fallen Lehman Brothers and is likely to retain nearly 2,000 strong workforce.
Similarly, American Insurance Group (AIG), - A Insurance Gaint of America and world is now taken over 70% by Federal Government for a sum of $85 bl. AIG has a business in India also, by special purpose vechicles namely TATA AIG. TATA holds 74% and rest 26% is with AIG. On concerns of TATA AIG future, there is TATA who have given thumbs up to all consumers who were worried about their insurance carried out through this special purpose vehicle (SPV).
Third, and even more significant, is the fact that the conservative approach to reforms in the financial services sector has ensured that the tremors of earthquakes in the US are being felt minimally in India.A meeting a few days ago of the regulators for the pension, insurance and other similar sectors concluded with a sigh of relief and pronouncement that slow and steady opening up of the economy has helped in the long run. This is not to say that capital account convertibility - or making the rupee freely tradable - will not take place. But probably as the regulators have pointed out, this can happen when the economy is at a more mature stage.
Ultimately, therefore, the big losers in the global financial crisis in this country are likely to be the iconic software firms like Infosys, Wipro and Tata Consultancy Services (TCS). Much of their business comes from the erstwhile giant investment banks and that could affect their profitability in the short term. In the medium-to-long term, however, these companies are likely to have greater resilience given their innovative approach in the past to hunting out new markets and customers.
The other area where worries still remain is the pullout of funds by foreign institutional investors from the country's equities and debt markets. The bourses have been showing considerable volatility ever since the news came in about the failure of Lehman and the domino-like effect on other investment banks.
While the Indian stock markets became volatile, they have not crashed as might have been expected initially. They now seem to be stabilizing as safety nets are being created for collapsed banks, like converting Goldman Sachs and JP Morgan into commercial banks while other banks are picking up some entities cheap like the takeover of Wachovia by Wells Fargo.
As far as the US and even Europe are concerned, the ramifications appear to be unending as the scenario is unfolding into the biggest banking crisis in 100 years. Financial institutions considered to have a rock-like stability including Merrill Lynch, Morgan Stanley, JP Morgan and the Lehman Brothers collapsed within days of each.
Some were rescued through various manoeuvres and only Lehman actually declared bankruptcy. Reports reaching here also indicate that many smaller banks are declaring insolvency in the US - a development not being taken note of by the international media which is focusing on the big fish. Thus average people in the US are facing severe hardship. No wonder then the battle is being described as one of Main Street vs Wall Street.
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