Global Meltdown


Date : Wednesday, October 08, 2008

As I write this, I am witnessing the most amazing collapse of the global markets with the indices across the globe coming crashing down.

Let us have a look at the developments that have taken place in the last 24 hours:

1.      Global Central Banks lower rates by 50 basis points.

2.      FED, ECB, BoE, Central Bank of China lowered their rates by 50 basis points.

3.      India had taken this step yesterday itself

4.      Global growth estimates for 2009 cut to 3% as against 3.9% projected earlier

5.      India growth estimates lowered to 6.9% as against 8% projected earlier

6.      Indian Market closes 700 points down breaks 11000 barrier

7.      Dow opens 200 points lower; European markets also down.

8.      IMF has clearly indicated that developed economies are either in or are entering a recession.

9.      IMF – Global outlook subject to considerable downside risks

10. UK banks have kept $50bn on call should the banks need them

11. UK feels that 50bn is not enough but is enough to keep UK out of recession.


The above developments clearly indicate the fact that the market is firmly in a vice like bear grip and it would take more than rate cuts to revive the markets. The market is now driven by fear psychosis coupled with dried up liquidity. It is now only a matter of time that panic sets in and people troop in herds to sell their stock as if there will be no tomorrow.


IMF’s view that most developed economies are either in or entering a recession phase is not very inaccurate. I fully endorse the view – and the worst is yet to come. Amidst the brohua of the stock markets no one is really paying any attention to the real estate and the credit cards segment – I think the next downward wave would come from these two sectors. Even the IT sector would witness some major downsizing. Recession in Europe and US is definitely going to impact the topline and the bottomline of the infotech company.


I have always been forecasting a global meltdown – particularly in the financial sector. The financial sector has been in a fragile zone for quite some time now and it was only natural that a small push in a pressure point would result in the whole market come tumbling down. This push has now come in the form of collapse of Lehman brothers which set off a series of chain reaction having impact across markets.


I have always been against the BPO culture and now more so. With a global recession in the offing the BPO segment is likely to witness a shakeout and the impact of this shakeout will leave a huge and ugly wound on the employment market and this would is going to take one helluva time to heal. We are going to be stranded with thousands of telephone operators with no specific professional or technical skill.


Like Shahrukh said in Om Shanti Om – “Jao mat dost – show abhi baaki hai” – The fun has just begun – so sit back, relax and don’t touch the remote (and more importantly don’t touch any stocks).


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