MEMBERS

PARAS SHAH
KEDAR BALIGA
SHANKAR SHRIDHAR
SIDDARTH KANNAN
DHARMARAJAN SUBRAMANIAM

BALAJEE NARAYANAN
HARSHAVARDHAN BAPAT
BHAGIRATH SHARMA
AMOL MAHAJAN
VIVEK SAWANT
29-10-2009
 Synopsis

Introduction to RECESSION

Definition of recession

Attributes of recession

Causes and effects of recession.

Impact of recession on IT sector

Recession and politics

Stock market and recession.

Consequences

Remedies
PURPOSE.
The purpose of this project is to study “THE FINANCIAL CRISIS” and studies
why and after effects of the crisis.

After this crisis many of the root causes were observed like speculation, fragility
of the system, greed of the managers which adversely affect the market.

Highlight the main purpose of the effects of recession on IT sector and share
market.
 What is Recession?

In economics, a recession is a general slowdown in

economic activity over a long period of time, or a business
cycle contraction. During recessions,
many macroeconomics  indicators vary in a similar way.
Production as measured by Gross Domestic Product
(GDP), employment, investment spending, capacity
utilization, household incomes, business profits
and inflation all fall during recessions; bankruptcies and
the unemployment rate rises.
 How it started in 2008 in U S?
 It started with the sub-prime crisis in the
US.
 Dollar value Declined Stock market
crashed
 All this slowed down the growth of
economy. GDP growth rate fell to 2%.All
this put together has driven the U.S.
economy in recession.
 Bankruptcy declared by companies after
failing to find buyers. In year 2008 as of
September 17 has seen 81 public
corporations file for bankruptcy in the
United states.
a) Indy Mac Bank
b) Lehman Brothers
c) Washington Mutual etc..
RECESSION

CAUSES Credit crunch -

shortage of finance 

Falling house prices - related

to shortage of mortgages and
credit crunch 

Cost push inflation

squeezing incomes and
reducing disposable income 

Collapse in confidence of finance

sector causing lower confidence
amongst 'real economy.

Low sales encourage

firms to cut prices
Effects
Slump in the
market
Stock prices come
down
Increase in
unemployment.

Depression .

National debts on
the rise.
The Impacts in India are:

1. Reduced liquidity in the Indian economy 

2. Reduced industrial output 
3. Reduced job opportunities 
4. Stock Market is lingering in the bottom 
5. Real estate market has started to take a beating 
6. Inflation has increased 
7. GDP has come down and the GDP forecast for the next two quarters are only
average. 
8. Change in consumer behaviors and purchasing power.
INFORMATION TECHNOLOGY

Information Technology (IT) industry in

India is one of the fastest growing
industries. Indian IT industry has built up
valuable brand equity for itself in the
global markets. IT industry in India
comprises of software industry and
information technology enabled services
(ITES), which also includes business
process outsourcing (BPO) industry. India
is considered as a pioneer in software
development and a favorite destination
for IT-enabled services. Today, Indian IT
companies such as Tata Consultancy
Services (TCS), Wipro, Infosys, HCL et al
are renowned in the global market for
their IT prowess
 Impact of recession on IT sector

About 20 mid-size companies in the IT sector

are willing to sell out
as the financial crises has made their
survival tough. These 20 IT
companies generate the revenues around
$100 millions to $150
millions. This is the first time ever wherein
the IT sector companies
have desired to sell out in this recession.
This event has been largly speculated by the
oversees IT majors
which have not made any strategy with
Indian IT companies.
The oversees IT companies feel that the
Indian promoters seem to
have become more realistic when it comes
to valuations prospects.
 EFFECTS ON IT FIRMS

Mid-tier IT companies have very little scope to

offer price cuts or discounts to customers,
according to Mr Ranu Vohra, Managing Director
and CEO of investment banking
company,Avendus Capital,”While companies
with revenue upwards of $500
million can manage price cuts with a manageable
dent in margins, the same becomes extremely
difficult for smaller companies.”
Valuations have been the reason why
many prospective deals
involving multi-national IT players
did not go through in the last
three years. But now the valuations
have dropped by 30%-40% as
compared to last year which may lead
to acquisitions.
Several merchant bankers have been
pursuing more inbound
acquisition opportunities in the past
few months than they did last year.
REMEDIES FOR IT SECTOR

DEVEL PRIORITY
FULL MORE GUARD
OPME TO FISCAL ACTIVE N
EMPL MEASURES AGAINST
NT OF SYSTEMA
OYME MEETING RISK OF
MORE TIC USE
NT N LONG
OF
EXCESSI
FLEXIB TERM VE COST
REASO "INCOMR
LE SOCIAL N INFLATI
NABLE ECONOMI S"
FISCAL ON
PRICE C NEEDS POLICIES
TOOLS
 STOCK MARKET

A stock market is a
public market for
the trading of company stock
and derivatives at an agreed
price; these
are securities listed on a stock
exchange as well as those only
traded privately. The size of
the world stock market was
estimated at about $36.6
trillion US at the beginning of
October
2008.  The total world
derivatives market has been
estimated at about $791
trillion face or nominal
value,  11 times the size of the
entire world economy.
 Stock market and recession
n anti ci pated by the stock
ks for the l ong run SIEGEL
0 rec essi onswere preceeded
s. There i sa view termed
ing to whic h the investors
c recovery about half way
rec essi on.
Impact on stock market

IN OCTOBER 2008 The STOCK MARKET Crashed from a height of

more than 21000,it tumbled down to almost 8000.Within the span of
just a few days, the wealth of the investors was eroded to the extent of
almost Rs. 21000 crores all over the world only from the downfall of the
Indian share market represented by the Sensex.

The downfall mainly contributed by the credit crunch has

long lasting ramifications on the indian stock market
affecting investor attitudes and virtually throwing small
investors out of the market
How to revive share market?

The share market which was at its peek

22000 points, was mainly due to
foreign contribution in the form of
FDIs through the FIIs. Due to
recessionary measures originated from
the American and European markets,
it would be better if we reduce our
reliance on the foreign sources and be
self sufficient by encouraging local
investors to invest in the Indian
markets. We can also encourage the
HNIs in India to make their resources
available to the Indian stock market so
that the Indian industries tap their
resources to their fullest advantage.
Repercussions {effects}
The recession in the US market and the global meltdown termed as
Global recession have engulfed complete world economy 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 availability and companies following downsizing 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.
EFFECTS

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.
 REMEDIES AGAINST RECESSION

Simultaneous achievement of full

employment and reasonable price
stability, in ways consistent with sound
long-term resource
allocation, will require active and
flexible use of a wide range
of policy tools. Every effort should be
made to meet the employment
and price. goals for mid-1972 cited in
the President's economic
messages. If additional demand
stimulus should be required,
the principal added thrust should
come from fiscal rather than
monetary measures
THANK YOU