Economy: The end of good times
Worrying times
Savings: Fear is the key. With the Sensex down by over 50 per cent and banks in shock, Indians face a high-risk, low returns era.
Jobs: Expect pink slip stories as companies faced with loss of business and a credit crunch begin shedding staff to control costs.
India Inc: Tough going. Poor sentiment and a crisis of confidence will drive sales and profits down. Globalisation is on hold and survival the mantra.
GDP: Slowdown in industrial output, slide in exports, evaporation of foreign capital and expensive credit may drive growth down to 7 per cent.
The macabre dance of debt, delinquency and destruction may well be staged on Wall Street but the virtual meltdown of financial markets has triggered a crisis of confidence across India.
The India Story that was authored by a combination of foreign capital and private enterprise is now hit by the exit of the very dollar that fuelled growth through private consumption. But as Diwali nears, it is not festivity but a calm desolation that finds resonance in India's main street markets.
Delhi's Connaught Place is shorn of shoppers. In Mumbai, Bangalore and Chennai, anxiety is writ large on employees of financial outfits and software giants. The erosion of wealth, threat to savings and vulnerability of incomes have driven consuming classes into caverns of anxiety.
On Dalal Street, brokers and punters alike are haunted by the images of bankruptcy. Investors are stalking banks and mutual funds with calls to assure themselves that their lifetime earnings are safe.
At one end of the spectrum, ICICI Bank Managing Director K.V. Kamath, despite many assurances and hard facts, has been plagued with speculation about a run on the bank.
At the other end, corporates and individuals have rushed to withdraw Rs 30,000 crore—or 30 per cent—of the money managed by liquid funds and fixed maturity plans (FMPs), thanks to worries about the value of underlying assets. Across India, rumour is the new currency and SMS the new idiom of fear.
The concept of trust is once again trapped between a history of scams and the geography of meltdown. History is replete with instances of financial bubbles that have devoured economies. But as Marshall McLuhan said, "Only the vanquished remember history.This was true of India too. Between January 2007 and January 2008, the benchmark Sensex soared from 13,000 levels to touch 21,000, drawing investors like the Pied Piper. Risk then was at a discount and the opportunity of rewards at a premium. That confidence has now evaporated.
To understand the magnitude of the crash, consider this: at peak valuation when the Sensex crossed 21,000, total market capitalisation (value of all shares listed) was over Rs 62,16,900 crore ($1.58 trillion). This has been more than halved.
Very simply, between January 14 and October 14 of 2008, investors have lost over half their wealth. The old maxim -returns cannot be without real risks-haunts investors.
As a tanking stock market and a credit crunch drove banks into shock, Indian businesses began issuing pink slips to survive. Almost alphabetically, aviation heads the queue in issuing severance slips as the sector—with $6 billion in revenues—is set to lose $2 billion this year, triggering an unusual alliance between bitter competitors Jet and Kingfisher. It's not just Jet or the aviation sector. Cholamandalam DBS Finance, which manages assets of Rs 7,000 crore, has announced the closure of 50 branches. Others in the race downhill include infotech companies and realty outfits. Irrational exuberance has been replaced with a fear that could turn into self-fulfilling prophecy.
What is remarkable is that India's best brains trust is involved in managing the crisis. Besides Prime Minister Manmohan Singh, Finance Minister P. Chidambaram and Planning Commission Deputy Chairman Montek Singh Ahluwalia, there's RBI Governor D. Subbarao, monetary guru C. Rangarajan and former RBI Governor Y.V. Reddy.
But such is the crisis of confidence that despite the A Team at the helm, markets continue to be nervous. Between October 8 and October 14, the RBI pumped Rs 60,000 crore into the market.
The India Story that was authored by a combination of foreign capital and private enterprise is now hit by the exit of the very dollar that fuelled growth through private consumption. But as Diwali nears, it is not festivity but a calm desolation that finds resonance in India's main street markets.
Delhi's Connaught Place is shorn of shoppers. In Mumbai, Bangalore and Chennai, anxiety is writ large on employees of financial outfits and software giants. The erosion of wealth, threat to savings and vulnerability of incomes have driven consuming classes into caverns of anxiety.
On Dalal Street, brokers and punters alike are haunted by the images of bankruptcy. Investors are stalking banks and mutual funds with calls to assure themselves that their lifetime earnings are safe.
At one end of the spectrum, ICICI Bank Managing Director K.V. Kamath, despite many assurances and hard facts, has been plagued with speculation about a run on the bank.
At the other end, corporates and individuals have rushed to withdraw Rs 30,000 crore—or 30 per cent—of the money managed by liquid funds and fixed maturity plans (FMPs), thanks to worries about the value of underlying assets. Across India, rumour is the new currency and SMS the new idiom of fear.
The concept of trust is once again trapped between a history of scams and the geography of meltdown. History is replete with instances of financial bubbles that have devoured economies. But as Marshall McLuhan said, "Only the vanquished remember history.This was true of India too. Between January 2007 and January 2008, the benchmark Sensex soared from 13,000 levels to touch 21,000, drawing investors like the Pied Piper. Risk then was at a discount and the opportunity of rewards at a premium. That confidence has now evaporated.
To understand the magnitude of the crash, consider this: at peak valuation when the Sensex crossed 21,000, total market capitalisation (value of all shares listed) was over Rs 62,16,900 crore ($1.58 trillion). This has been more than halved.
Very simply, between January 14 and October 14 of 2008, investors have lost over half their wealth. The old maxim -returns cannot be without real risks-haunts investors.
As a tanking stock market and a credit crunch drove banks into shock, Indian businesses began issuing pink slips to survive. Almost alphabetically, aviation heads the queue in issuing severance slips as the sector—with $6 billion in revenues—is set to lose $2 billion this year, triggering an unusual alliance between bitter competitors Jet and Kingfisher. It's not just Jet or the aviation sector. Cholamandalam DBS Finance, which manages assets of Rs 7,000 crore, has announced the closure of 50 branches. Others in the race downhill include infotech companies and realty outfits. Irrational exuberance has been replaced with a fear that could turn into self-fulfilling prophecy.
What is remarkable is that India's best brains trust is involved in managing the crisis. Besides Prime Minister Manmohan Singh, Finance Minister P. Chidambaram and Planning Commission Deputy Chairman Montek Singh Ahluwalia, there's RBI Governor D. Subbarao, monetary guru C. Rangarajan and former RBI Governor Y.V. Reddy.
But such is the crisis of confidence that despite the A Team at the helm, markets continue to be nervous. Between October 8 and October 14, the RBI pumped Rs 60,000 crore into the market.
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