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The bulls were all riding to the north till February, the celebration of Diwali, Christmas and New Year was still in the air, and above all, there were talks of India and China economies getting decoupled from US economy, India becoming more self-sustainable
and self-dependent. Then came the acid test of the de-coupling, US Sub-prime crisis started taking tolls on all the foundation pillars of the financial services across the globe. At initial stages, it looked as if only IT companies, which have major chunk of revenue coming from these big financial service providers and banks, will be getting affected, but then started one of the deepest bear hug of Sensitivity Index.

The crisis in US had down-sized the Indian growth story from a futuristic fairy tale of crown prince to a below average story of struggling man. Now the idea of decoupling sounds laughable, We have seen the result, how independent our functionings are with respect to Western Economy, US Economy is still the engine of world growth express. We are far away from being a decoupled economy, and how can we be one.

Complete Sensex was overloaded from FII and FDIs. All major financial institutions have picked-up almost every stock available listed in the sensex. What happened when they felt trouble in thier homeland? Obviously there was liquidity crunch, there was apprehension that US recession can send growth of complete world couple of years back . Institutional investors started selling their holdings one after another, and the result was the downward journey of Sensex. The same message was received clearly by Indian investors and they followed the way shown by wise men of the finance world.

What Next?

Asia-Centric Approach

Looking at the current trends, there is a shift expected from West to East, Indian investment banks are still doing better. Recently, Indian arms of I-Banks offered highest salary in premium business schools. In India, these banks are still showing profit and distributing bonuses, which are higher then anywhere else in the world. Same is also applicable for China.

Shift to Commodity

Commodity, metel and oil are still crossing new limits every day. Recently, oil crossed 112 Dollar per barrel whereas gold is its all time high of near 13,000. There is a direct correlation between prices of gold and oil and, hence, they are increasing together. For investors also, it makes more sense now to invest in commodity market as it will not only provide less volatility but also save value of their money from inflation.

Next

* Contributed by: -
Saurabh Shukla,
PGDSM - MIT04 (1st Year),
S. P. Jain Institute of Management & Research (SPJIMR), Mumbai.