Actually it is correlated, a large part of India's economy is tied to outsourcing of tech to India if the US economy goes into a recession, companies will spend less on technology, India tech companies will see less revenue, which means less jobs in India, which means less consumer spending there.
It is correlated definitely but to a smaller extent, didn't dig out my old finance notes but the correlation is lower than for other developed countries. Maybe someone can google out the actual figures
You would think that smaller developing economies are more correlated to the US since its the US who happens to be their number one buyer of goods more so then developed economies who sell to a wide range of countries.
I can't say for certain, we can only use the figures to calculate the correlation, but the factors wise is too complicated to reasonably assume that.
The U.S. is India's largest exporter, accounting for US 17% of all Indian good exported. Service accounts for more then half of India’s output which I take a large part is technology driven by U.S. Companies. https://www.cia.gov/library/publications/the-world-factbook/geos/in.html
You may want to take a look at this http://economics.nuim.ie/documents/N1101101.pdf This is a nice piece of work, I think it explained it far better than I can.
Well US Cut the rates yesterday and Indian markets respond it positively. US market was closed in -ve yesterday. Asian markets starting recover from lost. While Indian markets strong recover from 3 day lost. It is 842 points up now at the moment but surly close more tah 500 points today itself. Latest: SENSEX 17,571.01 +841.07 +5.03
losses reported by merrill lynch, UBS, citi group, bank of america and other giants due to subprime mortagage mess is also making things worse......these ginats are now selling their profitable stocks in India, China, Taiwan, hongKong etc.....adding more to selling pressure.
They are selling to the sovereign funds of Singapore, UAE as well as Saudi Princes. These funds have one thing in common, they save and save and save, having a huge pool of funds readily to absorb even the likes of Citigroup, UBS etc and getting them on the cheap. In normal cases, the Senate would have jumped and complained about losing strategic assets to foreigners but now it seemed grateful to be able to sell off everything. I remembered the P & O takeover, UAE had to give up some of the USA ports because of the outcry. Now they are buying in companies far more strategic.
First off the companies have not been sold off, they have been invested in. Each investment by sovereign funds into citigroup and Merrill Lynch and such have all been under 10% of stock ownership, they are not taking active role in day to day management and they do not get board seats. What is there to be upset about. One of the investors in Citigroup latest round was the state of New Jersey pension fund so its not even all foreign investors.
Don't look for the dollar to rise. The European Central Bank rate is a 1/4 point higher than the dollar and another Fed rate cut will lead to a lower dollar. We will have to see how the 3/4 point rate cut plays out in the forex. I wouldn't be suprised to see a 5-10% decline over the next month.
Reactions to the US market in the next couple weeks? The fed might actually make the people happy who knows
The market doesn't matter. The Fed is propping it up until the presidential election is over. What matters is inflation and the dollar.
But what your not taking into account our the other economy, the US drives the global economy and if the US slows down those other countries will slow down meaning that they will have to cut rates like the US and people are starting to factor that in now. The currency market that I follow pretty closely is the US/CANADA one and the dollar at its weakest point one dollar equaled .90 Canadian dollars. Now one US dollar equals 1.02 Canadian and I expect that it will keep rising because in an Uncertain global economy. Where is the place you want to be in at. That's in US treasury bonds which will increase the value of the dollar.
Canada has 1/2 point interest rate gap with the US the Fed may lower the US rate another half-percentage point on The Canadian dollar began strengthening on Jan. 22 when the Fed cut US rates http://www.bloomberg.com/apps/news?pid=20601082&sid=aEwDD2Hwhqps&refer=canada