Indian Companies and speculation.

Last week ICICI Bank lost 264 M$ in sub-prime lending.

Today L&T, posted over 50 M$ losses over Zinc futures.

A year ago Hexware software lost several millions on forex speculations?

Why are Indian companies taking the risky speculations. ICICI bank might be pardoned because it had taken huge quantities of US dollar bonds so it may have an intention of hedging it (but there are hundreds of analysts that are saying it was pure greed and not hedging). But what is L&T doing with Zinc futures.
Its main business is infrastructure (which requires concrete, steel), machine tools (which needs copper) and ship building ( which needs steel aluminum). But why Zinc??????

Indian CEO should realize that they should concentrate their attention in their core business and securities and trading are mere distractions. Most of the derivatives are zero sum game (i.e. losses = gain and no wealth is generated) but for them its a lose lose scenario. I.E. if their firm makes a loss, then the company stocks would be trashed, however if they make money then it won’t have any effect on the stock because stock market looks only at the future prospects of the company and these profits are not repeatable. Infact some analysts might downgrade the stock because speculative trades adds uncertainty to the company’s performance

Advertisements

Leave a Reply.... we want your views

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s