tag:blogger.com,1999:blog-3423996701597256548.post938801669975228468..comments2008-10-31T19:09:43.604+05:30Varun Khandelwalhttp://www.blogger.com/profile/07395915507717566990varun.khandelwal@bullerocapital.comBlogger2125tag:blogger.com,1999:blog-3423996701597256548.post-39210038436034232742008-10-31T19:09:00.000+05:302008-10-31T19:09:00.000+05:30Shruthi, you might want to read http://www.house.gov/jec/Research%20Reports/2008/rr110-21.pdf or http://www.livemint.com/2008/09/19220553/The-global-bear-hunt-begins.html to give you some sort of an overview.<BR/><BR/>To answer your questions:<BR/>1) Yes, the equity stake would on the RBIs balance sheet via a SPV<BR/><BR/>2) RBI doesn't decide on what stocks to buy. They hire asset managers such as State Bank, PNB, ICICI, HDFC, Reliance or even some of the foreign banks for the purpose of managing the money. The idea situation would be to have a consortium of asset managers. As a matter of fact, the Fed is taking a similar approach to buying CDOs under the TARP.<BR/><BR/>3) The RBI should ideally hold the stocks for a period of 3-5 years (or until such time when market conditions are attractive). The Hong Kong Monetary Authority sold their investments at a tidy profit several years after investing..Varun Khandelwalhttp://www.blogger.com/profile/07395915507717566990noreply@blogger.comtag:blogger.com,1999:blog-3423996701597256548.post-13686654934497039912008-10-31T14:32:00.000+05:302008-10-31T14:32:00.000+05:30Varun, correct me if I understand this wrong. SSF's imply that governments use forex reserves to buy stocks, infusing liquidity into the equity markets and restoring confidence. Is this right? If so, I have the following concerns.<BR/>1. While it is true that all RBI assets are ultimately technically owned by the GoI, reserves are on RBI's balance sheet. Is this an action that you think the RBI should take, or the GoI? Because they are two distinct legal entities. So the equity would be in the RBI's balance sheet at the end of the day. <BR/>2. How does the RBI decide what stocks to buy? The RBI is the regulator of banks. So I assume it doesn't buy a stake in any bank equity. Does it merely participate in an index fund type of activity? <BR/>3. How long does the RBI hold these stocks? Does it wait until stock prices "redeem" themselves? <BR/>I'm guessing all my questions point towards a need for greater understanding of the concept of SSF's. Could you point me towards some literature?<BR/>Thanks, and look forward to reading your other posts!<BR/>Shruthishruthi jayaramhttp://www.blogger.com/profile/05936955370281204971noreply@blogger.com