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According to the latest Astaire & Partners India Report, compiled by Deepak N. Lalwani, foreign Institutional Investors have sold a record US$13.5bn in India during 2008, as they faced heavy redemptions in home markets and deleveraged emerging market risk.

Last year they invested a record US$17.4 bn. Hope comes from the clear falling trend in inflation, which allows room for further interest rate cuts of up to 100bp in the next 4 weeks. This will help shift focus from fighting inflation to stimulating growth. Since the economic reforms of 1991, “normal” bear markets in India have lasted on average 15 months and have bottomed out at a P/E of 10x.

Lalwani thinks that this is not a “normal” bear market and P/E valuations may well bottom out around 7-8x. Currently the SENSEX, which is 55% down YTD at 8,965, trades on a P/E of 9.9x and should test 6000-7000 by March 2009 before consolidation sets in. The bear market has more bite left.

Tourism and travel will be an obvious victim of the recent terror attacks in Bombay. The timing is abysmal. The global credit crunch had already started to take a toll on foreign tourist arrivals. October growth was only 1.8% up on the same month last year, compared with double-digit growth in the last 5 years.

While tourism/travel is an obvious victim and will definitely suffer, overall there will be little economic effect from the recent atrocities. War is no......................

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