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Bad News for IT Sector :: Recession 2011 may happen

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Bad News for IT Sector :: Recession 2011 may happen

Last updated: September 2 2011
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  • Bad News for IT Sector :: Recession 2011 may happen

    Recession 2011: Asia would be hit harder by a second global crisis, says S&P
    8 AUG, 2011, 09.17AM IST, The Economic Times

    Recession 2011: Asia would be hit harder by a second global crisis, says S&P - The Economic Times

    A new global financial crisis would hit Asia harder than the last one, especially nations heavily exposed to offshore markets or still repairing budgets from the 2008-2009 crisis, credit ratings agency Standard and Poor's said on Monday.

    The agency, which incurred Washington's wrath at the weekend by cutting its AAA rating by a notch to AA+, said it was not predicting a rerun of the credit crisis that crippled markets and tipped the world economy into recession three years ago.

    But it warned of more sovereign downgrades in Asia next time around, if its assumptions turned out to be wrong.

    "If a renewed slowdown comes, it would likely create a deeper and more prolonged impact than the last one," S&P said in a statement.

    "The implications for sovereign creditworthiness in Asia-Pacific would likely be more negative than previously experienced, and a larger number of negative rating actions would follow. We wait to see."

    S&P said it assumed Europe's debt crisis and Washington's debt problems were unlikely to lead to "abrupt dislocations" in the financial systems and economies of major developed nations.

    On that basis, it added, its historic downgrade of the U.S. credit rating would have no immediate knock-on impact on sovereign borrowers in the Asia-Pacific.

    It cited the Asia Pacific region's sound domestic demand, relatively healthy corporate and household sectors, plentiful external liquidity and high savings rates -- though it listed New Zealand, Japan and Vietnam as exceptions to this.

    The S&P statement took on a much darker tone when considering the possibility that its assumptions were too rosy, noting that Asia still relied heavily on exports to the West.

    "Given the interconnectivity of the global markets, an unexpectedly sharp disruption in developed-world financial markets could change the picture," it said, noting that the U.S. and European economies could again contract or stagnate.

    "In this scenario, the experience of the global financial crisis of 2008-2009 shows that export-dependent economies with large exposures to the U.S. and/or Europe would feel the most pronounced economic impacts," S&P said.

    "It's not likely things would be very different this time." The agency listed those countries particularly vulnerable to disruptions in offshore capital markets as Pakistan, Sri Lanka, Fiji, Australia, New Zealand, South Korea and Indonesia.

    It also said several nations, again including New Zealand, were also still repairing their government finances and could be more constrained in responding to a fresh global crisis.

    "The adverse impact on Asia Pacific in that scenario would likely require governments to use their balance sheets to support their economies and financial sectors once again," S&P said.

    "And in our opinion, most governments would promptly oblige. But some of them continue to bear the scars of the recent downturn -- the fiscal capacities of Japan, India, Malaysia, Taiwan and New Zealand have shrunk relative to pre-2008 levels."
  • #2

    #2

    Re : Bad News for IT Sector :: Recession 2011 may happen

    IT stocks including TCS, Wipro, Infosys fall sharply on bourses on US crisis - The Economic Times
    8 AUG, 2011, 10.28AM IST, The Economic Times

    Shares of IT companies, which earn a major chunk of their revenue from the US and the Europe, fell sharply on the bourses on Monday on concerns over the US losing its top-notch credit rating due to mounting debts.

    All the three top IT companies, TCS, Wipro and Infosys, witnessed a huge fall in their share prices in morning trade on the BSE.

    At 10.23 a.m., the IT index of the BSE was down more than 5 per cent, underperforming the benchmark index , which was down 3 per cent. Shares of Infosys Technologies , Tata Consultancy Services and Wipro were down 5-7 per cent.

    The second most weighted scrip on Sen after RIL, Infosys dropped by 4.51 per cent to Rs 2,473.60.

    Weakness was seen in the stocks of other IT companies as well, with Tech Mahindra, HCL Tech and Patni Computer losing up to 7 per cent in early trade.

    The sharp fall came after the US lost its 'AAA' credit rating for the first time in history, as ratings agency S&P was not convinced with the efforts being made to tackle the country's debt problems.

    TCS, Infosys and Wipro rely on the US and European markets for about 60 per cent of their revenue.

    Comment

    • #3

      #3

      Re : Bad News for IT Sector :: Recession 2011 may happen

      Recession 2011: 2011 could be worse for India as US recession looms large
      8 AUG, 2011, 08.29AM IST, ET BUREAU

      Recession 2011: 2011 could be worse for India as US recession looms large - The Economic Times

      NEW DELHI: India weathered the 2008 crisis well, but there are fears that this time round the country is not even ready for a crisis of much lesser magnitude, let alone a full-blown debt default in Europe or a possible US recession.

      Weak finances, persistently high inflation and policy inertia have considerably weakened the government's position today.

      "This time our basics are weak. A domestic meltdown is expected and our resilience won't be as much as last time," said Nisha Taneja, professor of economics at ICRIER. Growth estimates are down to 7.2% in the current year, not far from 6.8% the country managed in crisis-ridden 2008-09, and every other indicator is pointing downwards.


      Contrast that with 9.3% growth on the eve of the crisis when India could do no wrong. "This time we may be on weaker foundations," chief economic advisor Kaushik Basu told Washington Post last week. Just before the crisis in 2008, the repo rate, the key rate in the economy, was 9%, which was cut quickly to stimulate demand and investments. This time round the best the Reserve Bank can do is to halt the rate increases because despite high borrowing costs consumption demand remains strong and any policy reversal risks inflation going out of hand.

      For the same reason, the government is in no position to risk a fiscal stimulus as it will stoke demand and raise inflation. The year 2007-08 began with a fiscal deficit of less than 3% of GDP. This strong fiscal position had allowed the government to announce a Rs 75,000-crore farm debt waiver and meet the generous Sixth Pay Commission award. Both of these, together with rapidly scaling up rural jobs scheme, held up demand when the financial crisis unraveled.


      Subsequently, the government was also able to cut taxes and announce other measures to stimulate demand. Although, in the current year, the fiscal deficit is budgeted at 4.7% of GDP, most experts expect the government to breach it by a good margin, with some estimates going as high as 5.5%. In such a situation, a fiscal stimulus is almost ruled out.

      "The ability to respond (globally) is very limited this time around," said Samiran Chakraborty, chief economist, Standard Chartered. "The fiscal space in India is also comparatively more constrained." Although the foreign exchange reserves are in excess of $300 billion, the balance of payments situation is weaker and the country could find it difficult to weather an export slump similar to the one in 2008, when growth turned negative for 13 straight months.

      The current account deficit is likely at over 2.7% of GDP, much higher than 1.3% in 2007-08, and foreign direct investments are not as forthcoming. The C Rangarajan-headed Prime Minister's Economic Advisory Council expects only $14 billion in inflows in the current year. Even without the crisis, things were not looking good for Indian economy. It has got much worse, though difficult to say how much. "The overall impact of the global uncertainty is difficult to predict as of now," said Pronab Sen, principal advisor to the Planning Commission.

      Comment

      • #4

        #4

        Re : Bad News for IT Sector :: Recession 2011 may happen

        Bhai, mujhe to lagta hain pralaya bhi haan hi jayegi 2012 me and earth will be destroyed. Only destructive things are happening. Cancellation of land acquisition, demolition of building. I think if the court finally cancels all aqucisition in NE and orders demolitioin of constructed structure, people should wait till 2012. Nature may play the role and demolish the structure.

        The events in NE were sufficient to scare people and now this talk of recessioin. Only God knows what future has in store for us.



        Originally posted by saurabh2011 View Post
        Recession 2011: Asia would be hit harder by a second global crisis, says S&P
        8 AUG, 2011, 09.17AM IST, The Economic Times

        Recession 2011: Asia would be hit harder by a second global crisis, says S&P - The Economic Times

        A new global financial crisis would hit Asia harder than the last one, especially nations heavily exposed to offshore markets or still repairing budgets from the 2008-2009 crisis, credit ratings agency Standard and Poor's said on Monday.

        The agency, which incurred Washington's wrath at the weekend by cutting its AAA rating by a notch to AA+, said it was not predicting a rerun of the credit crisis that crippled markets and tipped the world economy into recession three years ago.

        But it warned of more sovereign downgrades in Asia next time around, if its assumptions turned out to be wrong.

        "If a renewed slowdown comes, it would likely create a deeper and more prolonged impact than the last one," S&P said in a statement.

        "The implications for sovereign creditworthiness in Asia-Pacific would likely be more negative than previously experienced, and a larger number of negative rating actions would follow. We wait to see."

        S&P said it assumed Europe's debt crisis and Washington's debt problems were unlikely to lead to "abrupt dislocations" in the financial systems and economies of major developed nations.

        On that basis, it added, its historic downgrade of the U.S. credit rating would have no immediate knock-on impact on sovereign borrowers in the Asia-Pacific.

        It cited the Asia Pacific region's sound domestic demand, relatively healthy corporate and household sectors, plentiful external liquidity and high savings rates -- though it listed New Zealand, Japan and Vietnam as exceptions to this.

        The S&P statement took on a much darker tone when considering the possibility that its assumptions were too rosy, noting that Asia still relied heavily on exports to the West.

        "Given the interconnectivity of the global markets, an unexpectedly sharp disruption in developed-world financial markets could change the picture," it said, noting that the U.S. and European economies could again contract or stagnate.

        "In this scenario, the experience of the global financial crisis of 2008-2009 shows that export-dependent economies with large exposures to the U.S. and/or Europe would feel the most pronounced economic impacts," S&P said.

        "It's not likely things would be very different this time." The agency listed those countries particularly vulnerable to disruptions in offshore capital markets as Pakistan, Sri Lanka, Fiji, Australia, New Zealand, South Korea and Indonesia.

        It also said several nations, again including New Zealand, were also still repairing their government finances and could be more constrained in responding to a fresh global crisis.

        "The adverse impact on Asia Pacific in that scenario would likely require governments to use their balance sheets to support their economies and financial sectors once again," S&P said.

        "And in our opinion, most governments would promptly oblige. But some of them continue to bear the scars of the recent downturn -- the fiscal capacities of Japan, India, Malaysia, Taiwan and New Zealand have shrunk relative to pre-2008 levels."

        Comment

        • #5

          #5

          Re : Bad News for IT Sector :: Recession 2011 may happen

          https://www.indianrealestateforum.co...=14014&page=19

          Pl. Follow existing Forums.
          If You Guys Are Going To Be Throwing Beer Bottles At Us At Least Make Sure They Are Full

          Comment

          • #6

            #6

            Re : Bad News for IT Sector :: Recession 2011 may happen

            US downgrade may pose newchallenges for India

            The downgrading of the US government’s debt credit rating by the rating agency S and P has added new challenges to the already limping Indian financial market. As the country’s economy is facing the threat of a slower GDP growth in the current financial year, industry is reeling under high interest costs, inflation is ruling high and the stock prices are at their 14 months low, trouble in the US economy adds a new dimension.

            Already the fears of a double-dip US recession and the European debt crisis have shaved off nearly 1,644 points from the BSE Sen and Rs 225,000 crore in investors’ wealth in the last 10 days. And now there is a possibility of stock prices tumbling further when the markets open on Monday.

            No wonder the Finance Minister Pranab Mukherjee on Saturday described the downgrading of the US government as a "grave situation.” Post downgrading, if the US dollar depreciates against Indian rupee and other currencies, this is a distinct possibility though the US Federal Reserve has vowed to support dollar’s value, India’s foreign exchange holdings of $320 billion will dwindle in value as nearly 13per cent of it is held in US dollar.

            As one of the 15-largest foreign creditors to the US, India’s exposure to the United States’ ballooning debts is estimated at US $ 41 billion. The overall national debt of the US is moving nearer to $ 15 trillion, out of which it owes over USD 4.5 trillion to foreign countries holding the US government debt securities. While China is the single-largest holder of the US treasury bonds of $1.15 trillion, India stands at 14th position (about Rs 1.83 lakh crore), as per the US Treasury Department data. While the unprecedented downgrading of the US treasury bonds may lower the value of RBI’s holding, the central bank will not be able to switch its reserves to other currencies or to any other form of asset quickly. It is feared that apart from RBI some Indian banks also might have some exposure to US bonds, sources said. Some experts feel that the RBI may continue to hold US bonds even with a notch-lower rating, as it has been itself amassing the US treasury securities over the past one year despite a deepening debt crisis there. The Indian holding has grown by about $ 10 billion in the past one year.

            If the US economy plunges into another recession, as many economists are predicting, it will also be a bad news for India. As 60 per cent of India’s $60 billion exports is targeted to the US clients, their weak financials will hamper demand. Already the large IT and BPO outsourcing deals in US market were down 50 per cent in the six months Jan-June 2011, according to TPI data.

            While most Indian IT companies agree that there are fears of another recession in the US and a debt crisis in Europe, they feel it is still early days to know what is coming. “There are fears of another recession in the US and a debt crisis in Europe. But we were able to react very quickly in the past (2008) when the recession happened., said Infosys CEO and MD Kris Gopalakrishnan.

            Comment

            • #7

              #7

              Re : Bad News for IT Sector :: Recession 2011 may happen

              Originally posted by StudRawk View Post
              Sorry, do not analyze. Why Noida forum not talking at this important issue seriously when 90% members of this forum from IT Industry.

              Comment

              • #8

                #8

                Re : Bad News for IT Sector :: Recession 2011 may happen

                RE runs on black money primarily and not IT money. Particularly Delhi / NCR has hell lot of black money to let RE prices suffer. Cities like Bangalore and Pune will be affected.

                In fact falling equity markets may cause RE and Gold to shoot even higher.

                Comment

                • #9

                  #9

                  Re : Bad News for IT Sector :: Recession 2011 may happen

                  Originally posted by suavedude View Post
                  RE runs on black money primarily and not IT money. Particularly Delhi / NCR has hell lot of black money to let RE prices suffer. Cities like Bangalore and Pune will be affected.

                  In fact falling equity markets may cause RE and Gold to shoot even higher.
                  I think your perception is mainly suite only for DELHI but for other NCR cities, most of the flats purchased with in GGN / Noida is mainly by IT Jobs persons. If any politician / business man has lots of black money then he will still prefer DELHI over any other NCR city. Let me know simply how much black money can be adjusted in any good builder societies flat maximum 10-15% but in DELHI builder floors black money can be adjusted upto 70%. Recession in IT Jobs due to USA Crisis will mainly effect other NCR Cities or Pune/Banglor but not proper DELHI/Mumbai at all.

                  Comment

                  • #10

                    #10

                    Re : Bad News for IT Sector :: Recession 2011 may happen

                    I agree with you there. Delhi holds advantage over NCR in that respect. So , good time to invest in Delhi maybe.

                    But, even in NCR lot of resale deals are happening in even under construction flats. That's where black money kicks in brother, not in fresh bookings.

                    Comment

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