Buying time?

Whew! Stockmarkets fell 12% on an average in the last 5 days across the world. Developing Countries are locked step in step with the developed countries. This remarkable correlation suggests that the recessionary pressures are now turning global.
The fall in the Dollar against the Yen and the fall of other major currencies against the Dollar are studies in contrast. The fall of USD/JPY represents the unwinding of carry trade (at an accelerating pace if one sees the vertical fall in the currency pair) and shows that money is now getting out of global markets at an increasing pace - all that money that seems to have got into those markets in the first place, from Japan. The fall in other currencies (excl the Yen, that is) was on a simple economic rationale - the recession in US was expected for some time and the recession in Europe was a little less predicted. Eventhough the steps from UK and the Europe were comprehensive their currencies were hit by the flow of funds into the US which has been usual at such times in the past. Such flow of money seeks out US Treasuries.
A question that must be answered by those countries is - what must they do such that they could attract money, especially at such times. Look at the situation - the US economy is getting into a recession (it has caused it in the first place), yet, in such a situation the Dollar strengthens!! This is more than a dillema because the world keeps its reserves (mostly) in the Dollar. Now, as the US takes steps out of the recession, over the next few years, it does not have to worry about the cost of funding itself!
The intertwining of equitities, currencies and GDPs comes out very well in this latest episode of dominoes. Those countries that have run their economies on exports are hit by recessionary worries and falling exports hit their GDPs and of course their exchange rates. Those economies that ran current account deficits and funded those from foreign investments (into capacity creation) are anyway hit because their current accounts worsen in such situation unless imports contract. Because of capacity addition (and consequently) their imports are inelastic. Thus their currencies suffer too.
I would like to pause here to ask - is this why we are running scared here in India? Isn't the dependence on exports in India relatively small?. Don't we continue to keep our borders closed?. A few aspects must be noted here - One aspect is the growing dependence on the West in case of services (IT for example). The dependence on FIIs to keep the stock markets booming - in hundreds of stocks FIIs hold large chunks, whether individually or collectively and there sales are now driving prices to absurd levels. Promoters are dependent on FDI and PE. So many industries have thrived due to these investments. Another aspect is the wholesale dependence on FII inflows in order to build reserves. As the inflow turns into outflow we have a hit of about USD 30 billion on account of FIIs on the Reserves of the Country. The withdrawal of FDI and PE will be worth another USD 15 billion. No wonder the Rupee has fallen to 50 units against the Dollar and is likely to fall further. As FIIs suck out money and the RBI sells dollars to control the exchange rate the impact has been on the liquidity. The impact has been so grave that the large cuts in CRR and other measures taken by the RBI which are worth about Rs 150,000 crores have been completely offset by the Forex depletion and banks have said that PLR cuts are unlikely.
While GDP may fall to 7 pct or below this year and a little more next year, it is the above impacts that are confusing the minds of markets. Most stocks have reached the levels seen in the years 2002/2003 from where this bull market started - inspite of the fact that many of them are financially so much stronger and the Indian economy is still going to grow at 7 pct!
These are buying times if you believe what you read above - there is insufficient reasons for PEs to fall further or for prices to go further below book values. Market seems to be waiting for better levels to buy and the headlong crash of stocks is thus on lower volumes. Eventhough I may be wrong by some hundreds of points on BSE or some scores on the NIFTY, I would start buying now when there is so much blood on the streets.