FY 2011-12 Insight

Indian firms have had a bad year in 2011. Higher interest rates have not just hurt their net margins but have also hurt their expansion and investment plans. As a result, many of them turned offshore to get cheaper loans. However, as global crisis continued to spread its tentacles, overseas banks have become cautious with their lending. As a result, overseas borrowing has all but dried up for anyone other than the highest rated borrowers. This has put several smaller and comparatively riskier companies in a dilemma. They have to either resort to taking expensive rupee debt to fund their expansion plans. Or end up facing a period of stagnant growth. For those looking to restructure their existing debt, things are even worse. They either risk taking on more expensive debt or defaulting on their existing loans. Not a happy choice no matter what angle you look at it from.

The year 2011 is certainly not going to be a very memorable one for investors. In fact, in 2011, the BSE-Sensex recorded its second worst performance in the last 14 years, second only to 2008 when the US financial crisis struck. The benchmark index has tanked by about 24% than its previous year's closing, making it one of the worst performers in the global stock markets.