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As we the global economy is about to come out of the menace of recession it is now being hit
with a series of  cases that is yet to be contained. The outbreak has the origination from
Mexico where about more than 1000 people lost their lives.

Many have likened the economic impact of swine flu to that of SARS (Severe Acute Respiratory
Syndrome) back in November 2002 to July 2003, which delayed the post-dot-com recovery by
several months.

Swine flu is a respiratory disease. WHO says it is caused by influenza type A which infects
swine, or pigs. The infection is undergoing constant mutation or change and there are several
types of swine flu.

The flu spread most likely through coughing or sneezing. The symptoms are quite like that of
any other flu. These include fever, cough, sore throat, body ache, chill and fatigue.
Treatment for swine flu:
Till now there is no vaccine for the treatment of swine flu. Oseltamivir and Tamiflu are the
generic drugs that can be used for the treatment.

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1. The major outbreak of swine flu could be increasing the cash strapped Indian government
thereby increasing the fiscal deficit.
2. FII outflow will bring the stock market down.
3. Due to the massive capital outflow rupee is likely to depreciate further.
4. Industries could be affected as it will disrupt the supply chain.
5. GDP is expected to take hit due to decline in economic activity.

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c! Tourism Industry which has already been hit by the global
economic slowdown is now scared that if the swine flu is not controlled by the time of tourism
peak season i.e.; October, it will take a toll on the tourism industry.

2.  c! As the swine flu is likely to slow down the movement of people across the country
and within the country, it is likely to bring down the occupancy rate of the airline thereby hitting
the top line and bottom line.

Other industries will not see a direct impact from the pandemic. But economic slowdown caused
by the disease will restrict production and economic activity. This will hit their profitability.

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1. $ ! Cipla has the capacity to manufacture up to 1.5 million doses of Oseltamivir. It is
expected to benefit if any outbreak happens because of the huge production capacity.

Q4FY2008 Q4FY2009
NET Rs1142.76 Rs1366.74
SALES crore crore
NET Rs179.45 Rs252.92
PROFIT crore crore
2.  # %"! Ranbaxy has the production capacity that can produce and supply Oseltamivir at
very short notice.

Q4FY2008 Q4FY2009
NET Rs996.72 Rs822.13
SALES crore crore
NET Rs103.42 Rs 777.78
PROFIT crore crore

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Based on the assessment of meteorological conditions and the forecast of several Numerical
Weather Predication Models, IMD in its press release on 10th June indicated no revival of
monsoon for about a week. During the past week (10th-18th June), no fresh surge developed
either in the Bay of Bengal or in the Arabian Sea which could lead to further advance of
monsoon. Consequently, the northern limits of monsoon continue to pass through Lat. 17.0° N/
Long. 60.0° E, Lat. 17.0° N/ Long. 70.0° E, Ratanagiri, Gadag, Anantapur, Ongole,
Kalingapattinam, Paradip, Balasore, Bankura and Gangtok till date.

Normally, monsoon covers most parts of the country except northwest India by 20th June. Thus,
there has been a delay of about 10 days in advance of monsoon over Orissa, Maharashtra and
north Andhra Pradesh, and about one week over Bihar, Chhattisgarh, Jharkhand and south
Madhya Pradesh & south Gujarat.
Cumulative Rainfall (1st June-17th June)

Actual rainfall for the country as a whole is 39.5 mm against a normal of 72.5 mm with a
deficiency of 45%. Out of the 36 meteorological subdivisions, rainfall was excess/ normal in 8,
while it was deficient/ scanty in 28 subdivisions.

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Structurally the importance of agriculture as a percentage of GDP has decreased over the past
few decades from nearly 50% in the 1970s to 17% now. But monsoon still has the important role
to play in the economy as 60% of the total population depends on agriculture. Even today 60% of
the agriculture is rainfall dependent.

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As post credit crisis companies have started looking towards the rural India for next big growth
opportunity. Bad monsoon will have adverse impact on the company¶s growth plan as rural
income will decline, which will impact their consumption. Companies are looking towards the
rural economy as they are least leveraged as compared to urban India.


At present government has the capability to tackle the weak monsoon as the food grain with the
government is at 6 year high. But price increase will be more pronounced in cash crop and
vegetables and fruits. Rice, sugarcane, cotton, soy and oilseeds are the key kharif crops.

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(a) HUL
(b) ITC

(a) Hero Honda
(b) Bajaj Auto
(a) Mahindra & Mahindra
(b) Escorts

(a) Bharti Airtel
(b) Vodafone

(a) SBI
(b) Bank of Baroda

c 'c c  $   !

1. IT
(a) Infosys
(b) Wipro

(a) NTPC
(b) Tata Power

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It has been seen that good monsoon keeps the stock market in good mood. If there is below
normal rainfall or drought like situation the stock market performance will be significantly
affected. The affect will be more pronounced because still the investors¶ confidence is very
fragile. Rising price of food items will make the inflation zooming, which will make the interest
in the economy to go up. This will affect the investment and consumption.
Good monsoon is not only good for Indian economy but also for stock market.

In terms of potential beneficiary in events of weak monsoon, the government chooses to increase
the spending on infrastructure, irrigation and public work. Such increase in the rural expenditure
will help firms engaged in
(a) Infrastructure
(b) Capital goods
(c) Construction
(d) Irrigation technology
Indirect beneficiary could be sectors like
(a) Steel
(b) Fertilizers
(c) Cement

()$ (  (*  *
For the last few years it has been seen time and again that increase in the price of the crude oil
had a direct impact on the (*+ *. Though it is hard to imagine buy it is fact that a rise in
the oil price has negative effect on the stock prices at the (*,() all over the world.

The main reason behind this is the fear of the investors that the profit margin of the companies
will decrease because of the increase in the oil price. As an increase in the oil price directly
increases the operational cost, fuel cost, transportation cost of the companies, it is quite natural
that the profit margin of these companies will decrease. This is the reason that the buyers become
susceptible about the future of the companies that are hugely dependent on oil. This uncertainty
restricts the buyers to invest in these companies and as a result the price of the stocks falls that
ultimately has a negative effect on the overall market scenario. But this phase is temporary as the
companies adjust in the price level to make up for the increased price in the oil and maintain the
profit margin.

All said and done this fear for the fall in the profit margin is not practical according to the theory.
In practice the effect of the price increase in the profit margin of the companies takes time.
Before that could actually happen the companies take adequate measure to avoid the loss.
Therefore, the influence of the rise in the price of (  on the stock market is basically
triggered of the panic of investors rather than actual impact. But still it is always wise to wait and
watch after a rise in the oil prices takes place to make -+. In this phase it comparative
safer to invest in sectors that are not really dependent on oil such as software industry, banking
sector, financial companies.

"Indian economy is insulated from the crisis« The global financial crisis will not affect us
much," [Indian Finance Minister Palaniappan]Chidambaram said, at first. Chidambaram went on
in this vein until both he and his boss [Prime Minister] Manmohan [Singh] had to reluctantly
admit that no developing economy could possibly remain immune to the global crisis. Still, it
was projected primarily as a financial crisis or at best a precursor to a mild recession. But no
financial crisis is ever a mere crisis of the world of high finance alone. Just as the gloom on the
trading floors soon spread to the shopfloors in the factories, financial turbulence is just a
symptom of the turmoil in the real economy.
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In a global crisis of such historic proportion where the total bailout packages by all countries
work out to some 3 trillion dollars but where there is still uncertainty whether the system can be
salvaged, it is stupid to pretend that India would be immune to the systemic crisis. A finance
minister¶s (FM) job is not to give false hopes. Panic at the stock markets cannot be prevented for
long with pep words from the FM. Till October 14, the Bush administration alone has announced
bailout packages to the tune of over $ 990 billion apart from injecting fresh investment worth $
200 billion in banks and private financial institutions to shore up their financial position.

The contagion is truly global in a globalised world. How can the high priests of globalisation in
India expect to insulate the country from this all-pervasive crisis?! Already the financial crunch
is having its impact on the foreign institutional investors¶ (FII) hot money in India . Just wait for
the impact on trade, foreign direct investments (FDI), exchange rates, remittances, balance of
payments (BoP), forex reserves and, above all, on the macro-economy in India. Goodbye to the
rosy stories of double-digit µgrowth miracle¶, it is now an impending debacle that stares
economic analysts in the face.

The possible social impact is mindboggling. The new middle class in India is witnessing its first
financial meltdown and a possible deep recession. The information technology ± business
process outsourcing (IT-BPO) myth would soon be blown. The possible BPO gains could hardly
make up for the IT sector losses inflicted by recessionary economies in the developed world.
Anyway, if the job losses are already running into lakhs (100,000s) in the US , one can well
imagine how much political pressure will build up there against outsourcing. If such leading
names like Morgan Stanley, Merrill Lynch, JP Morgan, Goldman Sachs and Lehman Brothers
start biting dust and their brightest kids are given unceremonious marching orders, Indian B-
school products are surely in for a bad patch. Pre-election political pressure may have forced Jet
Airways to take back its decision to terminate 1900 employees, but the job scenario in the so-
called high-growth high-wage sectors has already turned gloomy.

All booms in India , based primarily on foreign money, will soon go bust. The recession-ridden
US consumer/industry can hardly sustain the growth miracles of China and India . The surpluses
of the Indian bourgeoisie would find a greener pastures in greater and greater acquisitions abroad
than investing anew in a dwindling economy at home. Didn¶t the Swiss bankers¶ association
point out a few months back that Indians were holding $1.4 trillion in Swiss banks? A sum about
40% larger than the gross domestic product (GDP)! The only breed that will thrive is the breed
of speculators ² in stock markets, currency trade and possibly in the real estate, gold and art
pieces where the desperate wealth would flow.

In US, if it was first the speculative housing market bubble/subprime and then the financial
bubble, in India it has just begun with the stock market bubble and possibly the real estate
bubble. When it extends to the investment bubble (what with the special economic zones (SEZs)
and other fabulous concessions, the telecom bubble, the IT-BPO bubble and so on), all claims of
India having weathered the storm would wither. India perhaps might go under late and might
take longer than the rest of the world to come out. All over the world there are 77 tax havens like
St. Kitts and Cayman Islands . But in India there are 580 SEZs!

+++((*  *
The festival season in India was seldom so gloomy for the share market. Investor wealth worth
Rs. 250, 000 crore (1 crore = 10 million) was wiped out on the bourses on a single day, on 10
October. The Sensex fell by 1000 points before recovering some 200 points, an intra-day drop of
some 800 points. The lachrymal wave washed away the festive mood.
At the first sign of stock market crash and FII funds stampede, the United Progressive Alliance
(UPA) Government has once again permitted P-notes (participatory notes) paving the way for
enhanced speculation. The present convulsion in the Indian bourses would look mild before any
possible explosion in future as a result of this heightened speculation. Despite the government
itself acknowledging that the P-notes were being abused/misused at the time of banning them, no
safeguard has been put in place. Anyway, how can there be any safeguard within the realm of
speculations? It is absurd.

³Indian banks are safe,´ reassured Reserve Bank of India (RBI) Governor Subbarao repeatedly.
Indian banks' exposure to international markets is relatively small at 6 percent of their total
assets, the rating agency Crisil said, adding that even lenders with large international operations
have less than 11 percent of their assets overseas. But a mini-version Indian bailout was in the
making simultaneously in the first week of October with the government virtually shoring up two
mutual funds and Life Insurance Corporation (LIC) coming to the urgent rescue of three more
which landed into liquidity crisis in the backdrop of a steep crash in the stock markets.

At a time when the big names in Western banking industry are queuing up for bailouts, there
may be a sudden leap in non-resident Indian (NRI) deposits in Indian banks as these funds would
look for a safe haven back home. We can hence expect a big clamour from the NRI lobby for
greater concessions for their deposits. Chidambaram would only be too willing to oblige. The
RBI recently increased the credit cost on term borrowings (with more than 7-year maturity) to
Libor+4.5% and even then the big Indian corporate names are finding it difficult to raise funds
amidst the present turmoil. Indian borrowers will end up paying more for the foreign lenders and
Indian banks might be forced to pay more for the NRIs ± all in the backdrop of a creeping
recession and falling rate of profits.

Even when Chidambaram was preparing to pass some 66 reforms-related pending Bills in
possibly the last session of the parliament and a committee had prepared a blueprint for major
financial sector reforms, the US financial crisis fell like a bombshell. No doubt, the UPA
ideologues would also use the global meltdown as a pretext to push the same risky reforms. In
the years to come, as the new investment projects go under one after the other and investors and
insurance companies and hedge funds go under trading in credit default swaps and all such
devices, the financial crisis here in India might be the denouement rather than the beginning as in
US. ICICI, the symbol of new breed of unscrupulous financial manipulators, is already in

( )3.
Liquidity position in India is comfortable, said RBI Governor Subbarao after a slew of measures.
But he avoided hinting at any possible reduction in prime lending rates. The liquidity position
may be comfortable, the banks and financial institutions might be slush with funds once again
but with interest rates ruling high there is no pick up in the credit offtake by SMEs (small and
medium enterprises). As they are the main employment providers in the industrial sector, the
employment in this sector has already taken a heavy toll. A deep and prolonged recession in the
West might result in unemployment for millions of these workers.

The RBI hurried to cut Cash Reserve Ratio (CRR) by 150 basis points to 7.5 per cent, releasing
more than $12 billion fresh liquidity into the Indian banking system. But if mere money supply
alone can drive the economy and industrial growth forward uninterruptedly, then no economy
will ever face any recession and there cannot be a meltdown of this nature. However, amidst all-
round alarmism and panic reactions, confidence building itself has become the main plank of
economic policy!
The government has once again liberalized ECB (external commercial borrowings by
corporates). It is a different matter that in the light of the meltdown nobody would bother to take
a second look at dollar bonds issued by Indian banks despite all their backing by the Indian
government and hence they are abandoning the idea raising external funds/borrowings. While
RBI might come forward to infuse liquidity liberally in the short-term, wait for the booming
NPA figures in the medium and long term.

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When the western economies are going into a tailspin one after the other, the appreciation of
dollar and euro looks somewhat paradoxical. From unprecedented appreciation earlier a few
months back, the rupee fell to record low ² reaching Rs.49 per dollar at some point. The dollar
is gaining vis-à-vis rupee because of the outflow of the FII funds and since the worst is yet to
come in the US /global meltdown, a repeat of the East Asian crisis in India is very much a
possibility. During the preceding period, if the rupee appreciated by around 18%, now it has
depreciated by around 19% during this Jan-Sept.

The exporters who were crying earlier are happy but it is now the turn of importers to come to
grief. Not many people know or remember that manufacturing imports had overtaken total
domestic manufacturing production in the domestic organised industrial sector this year. Apart
from cost escalation and consequent reduction in profit margins, just wait for the impact of the
rupee depreciation on inflation. The confident prediction of possible fall in inflation rate to single
digit by January sounds hollow in the backdrop of this as well as the cut in CRR rates and other
measures by the RBI aimed at increasing the liquidity.

The trade deficit is reaching alarming proportions. If exports are growing, imports are growing
even more. Thanks to workers¶ remittances, NRI deposits, FII investments and so on, the current
account deficit at around $10 billion doesn¶t look so threatening. But for some reasons if the
remittances dry up and FIIs funds take flight, it will be a repetition of 1991 after a few years if
forex reserves get depleted and trade deficits keep increasing at the present rate. Even as the
country¶s exports and imports registered a substantial growth of 35.1 per cent and 37.7 per cent
in dollar terms, respectively, during the first five months of the current fiscal (April to August),
the trade deficit during the period has shot up. The trade deficit was around $14 billion for a
single month of August 2008, a record level. Even Goldman Sachs¶ prediction that India ¶s forex
reserves would decline to $271 billion by year end from $310 billion in March 2008 looks a very
conservative estimate.
Unprecedentedly high forex reserves were becoming a burden. As most of these funds were in
dollars, the government had parked most of them in US treasury bonds or invested them in
securities and bonds in foreign banks. With the meltdown and consequent poor returns following
rate reduction, these treasury investments have taken a beating. The government had its fingers
burnt with the earlier dollar depreciation. A part of these funds could have been used to clear
some of the external borrowings. Now with the recovery of the dollar, repayment costs in rupee
terms have also shot up. A golden opportunity was missed. The government was toying with the
idea of establishing a wealth fund/SPV (Special Purpose Vehicle) with these reserves to finance
private parties taking up infrastructure projects through PPP. But, despite all the hype, the PPP
has been a total flop so far.

It might be just a slowdown in India till now. But a recession cannot be ruled out in the medium
term. Chidambaram is claiming 7.5 - 8% growth this year. ADB has predicted 7% growth. Many
rating agencies estimate industrial growth between 6.5% and 5.2% from around 11-12% in 2006-
07. It is hoped that agriculture would be the saving grace this year thanks to a good monsoon.
But just recall that Chidambaram was boasting about a possible 10% growth early this year after
the budget and the situation has changed!

True, there is a boom in FDI this year. The total FDI between April and August this fiscal stood
at $14.6 billion. A record figure. Average monthly FDI inflow is above $2 billion whereas a few
years back that was the annual figure. Kamal Nath was confidently asserting that the target of
$35 billion for this year would be achieved. But a closer look reveals that a sizable chunk of this
FDI going into mining loot, services, financial services in particular, entertainment industry
including luxury hotels and so on and also on mergers and acquisitions (M&As) not mainly to
fresh investments in the core productive sectors alone. The long-term sustainability of such a
pattern of FDI flow is anybody¶s guess. Especially, in the midst of the global liquidity crunch.
Inflows into already committed projects might give a false impression and it remains to be seen
how long this boom will continue. To sustain it, Chidambaram is bound to come up with a slew
of fresh liberalisation measures. FDI caps in insurance, banking and financial services are
already being hiked. There might be 100% FDI in single-brand retail. There will be more and
more sellouts to attract foreign capital. Chidambaram keeps repeating ad nauseam that India ,
like China , will continue high growth despite recession in the developed countries.

Well, if high growth is to be driven primarily by foreign capital assisted by government

landgrab, tax waivers, assured returns guarantees for infrastructure investments and fabulous
BOT terms and so on, in short, by making the whole of India into a tax haven, the structural
distortions this Manmohan gamble would lead to is mindboggling. Leaving a handful of big
business houses and Indian MNCs, nothing Indian would be left in the ³Indian´ economy. And
even the ³ India ´ MNCs have started looking outward. India Inc spent $26 billion in mergers
and acquisitions abroad this year. The global meltdown would, if anything, only accelerate this
trend and the scarce capital resources would be channelized for overseas spending. If this is the
story of overseas M&As by ³Indian´ companies, M&As in India by foreign companies is even
more breathtaking. In power sector alone, the merger and acquisitions worked out to $5 billion
out of a total M&A value of $55 billion in the infrastructure sector alone. This is the secret
behind the high FDI. But overseas M&A is not a rosy path. Tatas teamed up with AIG which
was one of the first to go under. TCS, Infosys and WIPRO«all were on an acquisition spree
abroad but at home they are the leading ones in issuing pink slips.
The nation would soon realize the real cost of the N-deal. N-deal was also a sort of bailout for
the US industry. Kakodkar has once again made it clear that 20 nuclear reactors would be set up!
How in the given situation the governments would foot the bill in the next ten years?

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And what about the growth story? Well, the ratio of savings and investment to the GDP
reportedly remains high at 35 per cent. So far so good. Still, there is a slowdown in the Indian
economy. The core sector growth is down to less than 4 per cent. All vital productive sectors are
on a slowdown. With such a structural background, if and when the Indian economy slips into a
recession, the recession will be protracted and there will be no a quick revival. Crude oil prices
have declined to $80 a barrel.

The monsoon has been good in most parts of the country. For a couple of years it is not difficult
to continue with the growth story. But infusion of liquidity, i.e., increasing the velocity of
circulation alone in other words, can hardly sustain production. The basic structural flaws are
bound to come back to the fore and haunt.

The problem might be made to look minor ² as that of liquidity ² at present but if there is a
severe constraint in demand then no amount of infusion of money into the system and supply
side magic would be able to save it. And given the fiscal scenario, the government would not be
able to go for any fresh neo-Keynesian binge either, leave alone any major corporate bailout as
in the US . Pay commissions and loan waivers might sustain aggregate demand for a couple of
years but signs of slowdown are already on the wall. Despite repeated promptings of
Chidambaram, the bankers are not ready to reduce even the home loan rates and not just the
prime lending rate for the businesses. After all, they are hardnosed businessmen and they will
continue to be top executives in their banks while Chidambaram and his party might go out of

The 11th Plan estimates that to maintain an average annual growth rate of 9%, the investment in
infrastructure would have to rise from Rs. 259, 839 crore in 2007-08 to Rs. 574,096 crore in
2011-12 at constant 2006-07 prices, aggregating to Rs. 2,011,521 crore over five years. In the
terminal year, this works out to be 9 per cent of the GDP, up from 5 per cent of the GDP in 2006-
07. The Plan document itself says that the government cannot manage this much money and a
substantial part of it has to come from the private sector. PPP is supposed to pave the way. But
what is the record so far? The Government of India's Committee on Infrastructure which
monitors PPPs notes that 244 PPP projects are ongoing and another 76 are in the pipeline in the
country. The total capital outlay in the ongoing projects amount to a minor fraction of the total
projection by the Planning Commission. To finance infrastructure projects, the GoI established
an India Infrastructure Finance Company Limited (IIFCL), a wholly Government-owned
company to provide long term finance for infrastructure projects. According to the IIFCL
website, it would provide loans upto 20 per cent of the project cost and projects "awarded to a
private sector company ... [a company established] through Public Private Partnership (PPP)
shall have overriding priority". And how big is this IIFCL? The GoI has successfully persuaded
the World Bank to give it a loan of a meagre Rs.2700 crore to finance projects worth Rs.
2,011,521 crore! Making bogus projections to justify pro-private sector policy changes is the
thriving industry in India . In such a situation, can any sizable fund flow into the risky
infrastructure sector of a developing country amidst tottering private banks and investment

Many approved SEZs are in doldrums as they are not getting any units and this whole thing is a
massive real estate speculation of gigantic proportions. Even though the real estate speculation in
India is taking a different trajectory and is not as reckless as credit instruments without any
backing by collaterals as in the US subprime, the real estate bubble centering around SEZs
landgrab is no less serious. Despite RBI¶s reservations, the banks were competing to lend to SEZ
promoters and even the nationalized public sector banks accumulating huge NPAs would be
lined up for private takeover. SEZs might finally achieve what Narasimham¶s two reports could
not achieve. If millions of home loan borrowers are defaulters, the banks can take back their
houses. Even they can takeover the SEZs. But if they themselves go deep into the red
irretrievably, they themselves would be taken over. Companies incurring loss too would be taken
over by stronger sharks. After a wave of takeovers, if the economy doesn¶t revive, this would
only amount to taking over the losses. A massive collapse in asset prices is the ultimate

"Suicides after market crash is an urban trend" « screamed the headlines in a pink paper.
Beneath that was the sob story of an entire family committing suicide after heavy loss in the
stock market. "Whether it is a seemingly well-to-do US-resident of Indian origin wiping out his
entire family or middle-aged brother-sister duo killing their parents and then committing suicide,
the financial crisis has hit everyone, and has hit them hard", the report added. At least, the
desperate farmers go alone leaving their family members in the lurch. But the scorched middle
class investors take their entire families along and that is the level of urban investing middle
class insecurity. This explains the golden age for gold as investment in yellow metal is
considered safer. Just think of the hundreds of new scrips by companies with ambitious
investment plans counting on these investible surpluses of the middle classes and also the market
opportunities opened up by their wealth. All these plans for new scrips will be scrapped. The
middle class boom might be glamorous but the depression in incomes and losses in the markets
are far more agonizing. Pink slips are painful indeed and joblosses are not limited to the West
alone. Those who are hoping that jobs in the West would shift across to the cheaper shores of the
India are missing the point that domestic job losses due to recession in the West as well as a
slowdown in India would far outweigh such outsourcing gains. Even the real estate boom is
going bust in Bangalore , the Indian El Dorado.

The Indian BPO sector derives 40 per cent of its revenues from the financial sector of the
developed countries and exactly as they mushroomed fast they will wilt with the same speed. IT-
BPO sector in India accounts for 5.5% of the GDP but 30% of exports and a very high share of
service sector employment in cities like Bangalore . El Dorado is poised to turn into a hell!

Take the case of garments and textiles. Hardly a few months back, tens of thousands of workers,
mostly women, were out of jobs in Chennai and Bangalore and towns like Tiruppur and Karur.
The villain was the rupee appreciation, leading to some 18% reduction in incomes in rupee
terms. After the loot by layers and layers of intermediaries, the factory producer was left with
nothing and hence closed down the unit. Now dollar has appreciated, smile returned to the faces
of garment owners but the smile soon vanished. The current exchange rate offers handsome
returns but the orders are drying up due to impending recession. No margin then«no orders
now! No jobs in both the scenarios.

The impact on the working class by means of wage compression and workloads, illegal
retrenchment and worsening of job security and working conditions etc., would be onerous.
Already this has started happening. For reasons of space, we are not elaborating. But we can only
say there will be many more NOIDAs.

The employment in organised industrial sector ± both public and private ± was 8.98 million in
1997 but it was down to 7.62 million by 2005, i.e., precisely during the growth miracle if we
leave out the disastrous year of 2001-02 for the industry when the growth was very low. If the
growth miracle turns into a debacle what will happen to organised sector employment? Formal
sector will be informalised and permanent workers will be booted out.

Bailouts for the bankrupt and boot-out for the workers. The same logic of capital! Total blackout
of the possible social impact of the meltdown and almost virtual absence of any discourse on
safety measures/nets is one of the characteristic features of the current crisis of capital, across the
globe as well as in India.

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Share prices can be extremely volatile in a day or even for briefer periods lasting a couple of
hours. Alternatively, shares may remain stable for days or weeks before a discernible trend
emerges. It is this uncertainty and unpredictability of share price movements that makes
investing such a fascinating exercise.

What moves share prices? A host of factors- some internal to a company and some external.
Broadly, the fundamental strengths and weaknesses of a share and its technical charts govern its
price variations. In reality, though, there are many variables which can affect investor sentiment
and hence share prices.

This article attempts to analyse factors influencing share prices in stock markets.

COMPANY FUNDAMENTALS- Share prices do reflect the company's fundamentals as a rule.

This means a company generating healthy revenues and profits year after year will appreciate
over a period of time. This explains why value and growth investors hold on to such shares as
they are not concerned with short term price aberrations. In the short term, wild swings in share
prices are the result of market sentiment. Sentiment changes as greed or fear overtakes majority
of investors.

COMPANY TECHNICALS- Investors figure out whether a share is overbought or oversold at a

given point in time. Studying the charts will tell you whether a particular share has breached its
short term/medium term/long term resistance and support levels. In technical analysis jargon, a
breach of a major support (a price point where demand exceeds supply) is a bearish signal and a
break above the resistance level (a point where supply exceeds demand) a bullish signal. There
are several parameters based on which an investor takes an investment call and this at the macro
level becomes an important factor influencing sentiment and share prices.

REGULATORY AND GOVERNMENT POLICY- Government policies are unpredictable and

can change at short notice. To tackle shortages in essential commodities, government may resort
to imports to cool commodity prices in the domestic market. This affects the profitability of
domestic companies and has a direct bearing on their share prices at least in the short term.

CORPORATE ACTIONS- A bonus or a rights issue at a steep discount to current market price is
likely to influence the company's share price in the near term. Similarly, a merger announcement
can send a company's share price soaring if it is perceived to be
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Election is like big carnival in India with entire population from all walks of life gets swayed by
it. There are colors and flood of money flowing. Everything comes to stand still. School, colleges
and offices close on voting day.
In India election process is held in multiple phases. 2009 election will be one month
extravaganza coming to an end by 16th may 2009, when one will be able to know about the
victor and the vanquished. The outcome of the election will also determine the development
trajectory of the India incorporate.

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India, the world`s largest democracy with an electorate of more than 700 million voter, goes to
the poll in April ±May 2009. We believe 2009 election will throw up the hung parliament with
fractured mandate. As long as BJP or a Congress led alliances is in power, investor will likely be
reassured of stability in terms of government as well as policies.
If a Third Front comes to power, it will create uncertainties in the mind of investor on the
development and policies front. Any Third Front government won`t be getting investors vote of

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Indian election is taking place in back drop of global economic turmoil. The domestic growth
stories of the past years have vanished. Capitalism is under siege and private assets are being
nationalized worldwide. India has domestic issues like growing terrorist attacks, law and order
situation, religious fundamentalism on rise, problem in neighboring country Pakistan and many
more that will be the key issue that will dominate the election.
The world will be closely watching the development. The composition, Utterances and deeds of
the next administration will be critical to the direction the nation takes and how the outside world
views the country. Will the next government carry forward the broad policy direction which
began in 1991 and push forward with the unfinished reform agenda?

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Returns from the past seven to eight elections have no exact set pattern. The returns in the run up
to the elections have been lackluster. Market generally in all the occasion has shown range bound
trading or sideways movement. Twelve month return post elections have been positive on four
occasions and marginally negative on two occasions. Years when government took bold steps or
the mandate swayed in favor of one party has raised the hope of investors and hence good returns
were seen. 1984, 1989 and 1991, the market rallied in the first year of the government.
After 1996 a significant change has been on the political front in India i.e.; beginning of coalition
era. The returns in these times were very moderate as the mandate was clear. The other reason
could be Asian crisis, nuclear test, Kargil war, Dotcom bust.

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1984 Indira Gandhi got assassinated; Rajiv Gandhi
came to power with overwhelming majority.
Market gave thumbs up.
1989 VP Singh became the PM. A massive drive
against corruption in the government was taken
in good way by the investor.
1991 Congress came to power after the assassination
of Rajiv Gandhi. Market reacted positively.

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1984 4.8 4.4 3.8 29.4 68 92.9
1989 -3.9 0.2 11.9 -2.3 13.1 90.8
1991 0 11.7 8.9 44 42.1 142.8
1996 11.8 33.2 6.7 -9.2 -18.9 -1.5
1998 2 -2 14.9 14 -14.5 -3.3
1999 2.9 16.7 -4.5 6.5 6.4 -13
2004 -13.4 9 -10.7 -5.8 6.7 16.7

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Earning downgrade in next 2-3 quarter.
The ongoing government is like a caretaker government with no fresh proposal and budget will
be placed by the new government in power.
Stability and ability of the government cannot be judged at this point.
Fiscal deficit is high at 5% of the GDP.
Indo ±Pak relationship hits new low.
Terrorist attack.
Index heavy weight like RPower, Suzlon, JP Associates plunged by more than 75% from the
peak. Many of these stock compositions of the index do not have 5 years standing in the market.

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Sensex trading at 9x to the expected 2009 earnings.
Falling commodity price will ease input cost of the industries.
Government policies to boost the economy.
Inflation at record low.
Lower crude price.
As interest rate in developed economy is record low, India could attract investment.

As the new government settles down and the reform that was taken up by the previous
government is carried forward, we believe market will again resume its bull run in the second
half of the 2009. We also believe the era of coalition is here to stay and market will not be
affected as long as it is seen that the coalition is stable and there are no expectation of major
policy reversal.
However if the Third front comes to power, the market is likely to taste another low.

Our small endeavor will help you understand market in better way.

+((* 7 (*
Sachin Tendulkar has got 94 centuries in International Cricket so far. He has certainly had an
impact on all over India, and over the other cricketing nations. We performed an analysis of the
day Sachin Tendulkar hits a century, and the movement in the Stock Market (SENSEX) the very
next day. Although Sachin hit his first International century in the year 1990, but India got its
LPG policy in the year 1991. So, in all the 93 centuries that were hit during the Stock Market era
of India, gave the following statistics:

SENSEX Rises: 55 Times

SENSEX Falls: 38 Times
SENSEX Flat: 1 Time

Sachin was at its peak during the years of 1998-1999, when he had just given up his captaincy.
During these years Sachin hit 23 Centuries. Coincidentally at this time the Asian economy was
under the effect of Recession due to the Asian Financial Crisis. 16 of those 23 centuries, the
stock market fell (Although Sachin did try his best). Similarly, in the recent Great Recession of
2007-09, Sachin hit 8 Centuries, of which the Market fell 5 times. So, if we remove all the
recessionary forces from the Sachin Tendulkar - Stock Market analysis, we would get the

SENSEX Rises: 44 Times

SENSEX Falls: 17 Times
SENSEX Flat: 1 Time

This gives us the following analysis:

When Sachin Tendulkar scores a century, it is very likely that the Stock Market will rise the next
day. (Provided there isn't a recession.)

Sachin Tendulkar is always at its best, during the times of Recession, since the time he has been
at the peak of his form, it has always been recession, i.e. Asian Financial Crisis and Great

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Economic activity usually passes through the four phases ± Recession,
Depression, Recovery and boom. When GDP and the employment are declining, the
economy is said to be in a Recession. Which when deep becomes a depression when
output and employment are raising the economy is to be in a phase of recovery, which
becomes boon as full employment nears and industries operate at maximum capacity.
Recession can be defined as ³significant decline in economic activity lasting more
than a few months which is normally visible in real GDP real income employment
industrial production and wholesale retail price´ The vulnerability of recession leads to a
decreased demand for goods and services which in turn to a decrease in production lay
offs and a sharp rise in unemployment. The recession period the consumers loose
confidence in the growth of the economy and spend less.

The recession also affects stock market also. In this period the investors fear to
spend for the stocks ultimately the stock value will fall and thus stock markets fall on
negative sentiment.

As per observations of post war recessions the economy was affected in the
investment production consumption and inflation oil, prices inventories and equity prices.
The investment as declined the stock market fell down for a 6 months.
A economy which grows over a period of time tends to slow down the growth as a
part of the normal economic cycle. A recession normally takes place when consumers
lose confidence in the growth of the economy and spend less. This leads to a decreased
demand for goods and services that are in turn lead to a decrease in production lay offs
and sharp rise in unemployment. Investors spend less, as they fear about stock values
will fall and thus stock markets fall on negative sentiment.

Some recessions have been anticipated by stock market declines. In Stocks for
the Long Run, since 1948, ten recessions were preceded by a stock market decline, by a
lead-time of 0 to 13 months (average 5.7 months), while ten stock market declines of
greater than 10%. Since the business cycle is very hard to predict, it becomes too
difficult to take advantage of economic cycle for timing investments.

The present study will focus on the impact and analysis of the recession on Indian stock markets
and the real economy.
1. The study finds that as trading is risky in recession period the majority of 46% of
respondents preferred to trade in forward as a low risk. Moderately, the
respondents preferred future trading. Spot trading, Intraday Trading, and options
seem high-risk mechanisms.
2. It is found that in the recession period the majority of respondents have experienced
that equity investments beared highest risk. Moderately forex and commodity
assets beared the risk. Debt beared slight risk. But Gold is not much affected in the
recession period.
3. The majority of (66%) respondents preferred to hold their investment in recession
period better than trading. Moderately 24% of respondents go to hedging because of
safe keeping their investment. A few number of respondents sold their holdings
because of fear of further down fall in the market.
4. The majority of 90% of respondents experienced the worst affect of recession on
stock market. They lost a greater loss of their holdings.
5. The majority of 68% of respondents preferred purchasing the stocks in the market
better than selling. Selling in the period of recession losses more and as prices
reduced it is said to buying is better. It can be possible to extend the investment.
6. The majority of respondents preferred Bank Savings as better avenue for
investment. The moderately, the respondents preferred to invest in Insurance and
Postal Saving Deposits. Stock Investments beared highest risk in the period of
7. In the time of slowdown, the more number of respondents preferred buying for long
time is better than the buying for short term. No one expect the market condition in
volatility situation. There is greater reduction in share prices and investor can easily
get the shares. So they found its better to buy and hold uo to market recovery.
8. The majority of respondents has experienced that I.T sector suffered much. Real
estate and Fast moving Consumer Goods also suffered in a same way. Only the
insurance and banking sectors are not troubled much. The reason is that strict
regulatory policies and timely guidelines of Reserve Bank of India, and cutting
down of Cash Reserve Ratio and Repo Rates.

Impact of Global Recession on Indian Market

The recession in the US market and the global meltdown termed as Global recession
have engulfed complete world ecomony with a varying degree of recessional impact. World over
the impact has diversified and its impact can be observed from the very fact of falling Stock
market, recession in jobs availiability and companies following downsizaing in the existing
available staff and cutting down of the perks and salary corrections. Globally the financial sector
sacking the existing base of employees in high numbers in US the major example being CITI
Group same still followed by others in hospitality industry Jet and Kingfisher Airlines too. The
cut in salary for the pilots being 90 % can any one imagine such a huge cut in salary.

In the globalized market scenario, the impact of recession at one place/ indusrty/ sector perculate
down to all the linked indusrty and this can be truly interpreated from the current market
situation which is faced by the world since approx 2 month and still the situation is not in control
inspite of various measures taken to fight back the recession in the market.The badly hit setor at
present being the financial sector, and major issue being the " 8
 " " in the

In-spite of the various measures to subsidise the impact of the recession and cut down the
inflation present nothing really sound have been done.

Various steps taken by RBI to curb the present recession in the economy and counter act the
prevailing situation.
The sudden drying-up of capital inflows from the FDI which were invested in Indian stock
markets for greater returns vizualizing the Potential Higher Returns flying back is continuing to
challenge liquidity management.At the heart of the current liquidity tightening is the balance of
payments deficit, and this NRI deposit move should help in some small way.

To curb the liquidity crises the RBI will continue to initiate liquidity measures as long as the
current unusually tight domestic liquidity environment prevails. The current step to curb these
being lowering of interest rates and reduction of PLR.However, the big-picture story remains
unchanged â¼³ all countries in the world with current account deficits and strong credit cycles
are finding it difficult to bring cost of capital down in the current environment. India is no
different. New measures do not change our view on the growth outlook. Indeed, we remain
concerned about the banking sector and financial sector. The BOP- Balance of Payment deficit
â¼³ at a time when domestic credit demand is very high â¼³ is resulting in a vicious loop of
reduced access to liquidity, slowing growth, and increased risk-aversion in the financial system.

In total the recession have turned down the growth process and have set the minds of economists
and others for finding out the real solution to sustain the economic growth and stability of the
market which is desired for the smooth running of the economy.

Complete businesss/ industry is in dolledrum situation and this situation persist for a longer
duration will create the small business to vanish as they have lower stability and to run smoothly
require continous flow of liquidity which is drived from the market.

In present situation down fall in one sector one day leads to a negative impact on the other sector
thus alltogether everyone feel the impact of the Financial crises with the result of the current
recession which started in US and slowly and gradually due to linked global world have
impacted everyone.

Solution for the problem still remain at the top of the mind of every one, still everyone facing the
impact of recession but how long is the major question which is of great importance.