ICICI bank a bellwether for Indian Financial Sector

Implications: 1. In a rising market how much is backed by fundamentals and how much is irrational exuberance.

Analysis: Capital is not a challenge. More money is coming to India than ever before.Every foreign investment banker will tell you India is a long term story. But how sustainable is a double digit growth over the long term. Indian story is evolving and there are likely to be bubbles bursting on the way. But country's fundamentals being strong they could turn out to be blips. Every market undergoes a correction at some point in time. Having said that, Indian stockmarket is a unreliable partner.  Can't be trusted as a barometer. Too many scandals have botched its image.

But the ICICI group has a pretty good image with strong credentials. ICICI Bank has ambitious plans to mobilise private equity investments. ICICI Bank is the second largest lender in India. But then, to borrow money from international markets to lend locally and to fund corporate investments overseas is risky, notwithstanding strong credentials.

World markets off late have become very influenzaist. When one market sneezes other markets catch cold. Subprime is a case  in point. Therefore borrowing from overseas markets is no guarantee for cheap money.May turn out to be otherwise. With a rupee on the rise margins maybe squeezed. Therefore, ICICI Bank must not be carried away by the rising Indian economy or double digit P/E ratios. Investments should be based on strong fundamentals and long term prospects of a corporate. Should look beyond 3 - 5 years. A Bank is there for  the long haul. Not behave like a weather cock.