2. CONTENT
Factors for US Downgrade
Prospects for Developing Countries
Impact on India
3. MAJOR FACTORS FOR US DOWNGRADE
Debt ceiling
Limit set by US congress on the amount of debt the
government can borrow.
High fiscal account deficit
In 2011 federal budget, the US government estimated
the expenditure at $3.82 trillion and revenues at
something more than $2 trillion
U.S. political problems
To approve the debt ceiling both democrats and the
republicans agreed on consensus.
S&P cut down the rating from AAA to
AA+
4. PROSPECTS FOR THE DEVELOPING COUNTRIES
IN THE LIGHT OF DOWNGRADE
The world economy continues to recover
from the global crises
It would take 4-5 years before
employment is back at pre-crisis levels in
developed countries
Food supply growth fell short
More and more countries are expected to
further unwind both monetary and fiscal
support measures
Fiscal policy needs to be redesigned
5. IMPACT ON INDIA
IMPACT OF US DOWNGRADE
India is likely to witness volatility over the next few days and the
market may trade lower. It is expected a 5-7% downward impact on the
domestic market.
OUTLOOK FOR INDIA
India will outperform on downside, it is expected next year to be very
good, as rates will peak and inflation will ease. There may be even 20-
25% returns.
ON DEFENSIVES
Valuations in defensive stocks are too high.
ON INFRASTRUCTURE
Infrastructure stocks are waiting for interest rates to peak. After that,
you can start buying. But they will do well in the next two year.
ON INFORMATION TECHNOLOGY
IT is one sector where historically large-caps have broadly delivered.
the IT industry is doing well in 9-12 months.
6. CONCLUSION
U.S the strongest economy on verge of economic
crisis
Adverse effect on share market
Fear of double dip recession materialising
Downgrade in U.S affecting European nations
