Article: 3rd October 2008 , Author Joy:: OLD POST

Article: 3rd October 2008 , Author Joy

There is a recent panic building on the global economic analysts and investors with the falls of many Investment banks in series. More than the fact the rumors are spreading across market especially in brokerage fields. We have seen recent dips in NASDAQ and also NSE, BSE in India. Of course the fact is that the Economy is playing ugly and as the US Banks are declaring bankruptcy but certainly there is no valid reason to put the Stock Market index in red across the globe. This is happening because the short term panic in the market as the market is mainly driven by emotions in short run.

We have to understand one basic point that the market has not collapsed over night and there was significant evidence in year 2007 that the market would go bearish in future, we have seen one of the world’s largest bank Citi under great cyclone. After restructuring itself Citi could not greatly recover its financial crisis till date. It is proved concept that the long term performance of any institute is based on the strategy and the execution of the plans and hence different kind of industries and different countries would not behave in the same manner as the global economy or US crisis.

We have heard various CEO’s talking about transformation in their business models; the services sectors can really utilize the transformation to put the market condition favorable for them. Due to the money crunch in huge investment sector the liquidity flow is hampered and the new investment on R&D would be less and in fact the new startups would face a strong resistance. Unlike the other sector the services sector can turn the condition in their stride, may it be IT services or Pharma or Engineering services division.

Let’s take the focus back on India and how Indian companies are going to behave on this. Indian transformation which briefly started 15 years ago is mainly built on the pillars of services sector. As we have already reiterated that the service sectors could transform the business, Indian Corporate can make the situation favorable for them. The behemoths like US and EU countries are hit with the economy crisis and the only way for them to overcome the crisis is to reduce the expenditure and increase the cost effectiveness across the verticals. With the recent bailout plan the institutes are in huge pressure for performing and fighting for their survivals. The wave has created a new space for Indian IT sector where Indian Companies have bagged some straight outsourcing deal of end to end IT Infrastructure Management. We have to understand that the offshore onsite model is gradually moving towards more cost effective offshore execution schema which means lesser margin for the Indian companies but this exposes a point of improvement for them to achieve more effectiveness.

The global situation is a bit alarming and all the achievers have to play safe as they also have a pressure of keeping their position safe and grow. Indian companies may pose threat to themselves if the growth is inorganic in this phase as the cash crunch could also be felt in near future. Though the trends of overseas acquisition has increases, Indian private firms should again relook their financial sheets as most of the liquids available came from exponential growth in 2005 to 2007 time. In contrast to this the chances of Indian Banking sectors to sustain in respectable stage is high due to an outstanding control of RBI on it.

The way the market would see itself is not profitability but the market capture in terms of long term client commitments thus if the economy bounces back the face value of the business automatically would be inflated. Though the Chinese firms have a little inflexibility as most of the business firms are still strictly controlled by Governments, it has a huge potential to harness the possibilities.