SUMMER TRAINING

“A Comparative Study of Effects of Recession

& How Can We Overcome to It”.

SUBMITED TO:
SUBIMITED BY:
Mr. Mohan Kishore Sharma Shiv Ram
Laxman
PIBM, Pune Page 1
Area Manager, SHCIL, Rajasthan Pune Institute of
Business Management

Jaipur (Raj.) Pune

(Maharashtra)

CONTENT

1. PREFACE

2. ACKNOWLEDGEMENT

3. OBJECTIVE OF STUDY

4. COMPANY PROFILE

5. RESEARCH METHODOLOGY

6. RECESSION

7. CAUSES OF RECESSION

8. IMPECT OF RECESSION

9. HOW TO OVERCOME BY RECESSION

10. LIMITATION

11. FINDING & INTERPRETATION

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 12.SUGGESTION & RECOMMENDATION

13. CONCLUSION

14.BIBLIOGRAPHY

PREFACE

Private sector is one of the fastest growing sectors in the

country. After the Liberalization the Private industry still holds
vast opportunities for young and experienced professionals.
After Privatization, the PSU has been making efforts to improve
efficiency and customer services. Among the financial services
Stock Holding Corporation of India Ltd. is the key player.

The financial Sector is full of competition even if there are

a lot of opportunities to the job in SHCIL and it is the platform
to go on the highest peak in the life of any coming one. SHCIL is
a single window that provides the multisystem facilities of the
financial Products. There are many companies in the market
which are providing the financial product like insurance,
demat account services, mutual funds, general insurance,
Portfolio management services(PMS), Money changing , Money
Transfer, and the others.
Hence SHCIL provides many financial products on the
single window. SHCIL deals with the product and Investment

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options are available in...

• Equity (Stock) Trading.

• Money Transfer

• Depository Participants

• Custodian

• IPO's

• Mutual Funds

• Insurance

ACNOWLEDGEMENT

I would like to express my sincere gratitude to the

management of SHCIL for giving opportunity to undergo this
summer training project in esteemed organization.

I place on recorded my sincere thanks & gratitude to my

project guide Mr. Mohan Kishore Sharma (Area Manager –
Jaipur) who has been a constant source of inspiration & support
the course of the project.

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 I wish to acknowledge and express my gratitude to Mrs.
Harshita Rajshree (Branch Manager, SHCIL - Jaipur) who gave
me the opportunity to work in this organization.

I am grateful to Mr.Pankaj K. Purohit (Officer Operation

SHCIL - Jaipur) for his assistance and inspiration. The
knowledge, advice, support, suggestion, helpful, tips given to
me by him helped me to successfully complete this project.

I am also thankful to the staff members of SHCIL for giving me

the useful information whenever I approached them.

At, last I am deeply grateful to my parents and friends who

have given every help and moral support and their constant
advice, which enabled me to pursue my training.

SHIV RAM LAXMAN

PIBM, PUNE

PGPBM + MBA

Objective of the study

• To Study the Primary functions of SHCIL

• To study of different services of SHCIL.

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 • To study the Investment behavior in Mutual Funds.

• Effects of recession in India.

• Causes of recession.

• How can we overcome by recession

Company profile

Stock Holding Corporation of India

Stock Holding Corporation of India Ltd.(SHCIL) was
incorporated under the companies Act, 1956 in July 1986 and
promoted by the seven all India financial institutions, viz. LIC,
GIC , the four general insurance companies, ICICI Bank , UTI,
IDBI, IFCI and IIBI. SHCIL commenced operations in August 1988
and has been providing custodial, depository and related
services.

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SHCIL’s clients include, all major investment institutions,
insurance companies, major mutual funds and large public sector
and private sector banks. SHCIL has received No Action Letter
from the securities Exchange Commission, USA which enables it
to provide custodial and related services to US- based funds as
well. With the introduction of the depository related services to
the retail segment and over the last few years, it has come to
acquire the stature of being one of the largest Depository
Participants besides being the largest custodian. The corporation
provides depository related services to its retail segment through
190 offices located across the length and breadth of the country.
SHCIL has four subsidiaries, namely, SHCIL Services Ltd. (SSL),
SHCIL Projects Ltd. (SPL), SHCIL Commodities and Derivatives
Trading Company Ltd.,(SCDTCL) and Unitec Value Solutions Pvt.
Ltd. Singapore (UVS).
SHCIL has been earning profit consistently and declaring dividend
right from its inception. With a share capital of Rs. 211 million,
SHCIL’s tangible net worth reached Rs. 2978 million as on March
31, 2008.

Products and Services

Stock Holding Corporation India Ltd. has a complete
portfolio of services to meet the requirements of clients. Offering
more and more services with safety is a top most priority the
corporation.
Custodial Services: SHCIL has been providing first-rate
custodial services over two decades to India's leading Financial
Institutions, Insurance Companies, Mutual Funds, Foreign
Institutional Investors (FII's), Banks, Indian and Foreign Venture
Capital Companies, Funds, PF Trusts and Corporate. The custodial
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services provided by SHCIL include post trade settlement, safe-
keeping, corporate actions and customized reporting. Custodial
business witnessed robust growth with the acquisition of new
clients such as Insurance Companies, Banks, and other
Institutions and Corporate, apart from new schemes from existing
clients.

Clearing Services: SHCIL is a Clearing Member on the Futures

and Options segment of both National Stock Exchange and
Bombay Stock Exchange, offerings. It has the necessary
infrastructure in place that enables handling of residual trades in
physical mode and daily verification of settlements
(Normal/Auction), thus mitigating systemic risks. SHCIL's long-
standing association with Clearing Members has enabled it to
develop services based on an understanding of their working and
their requirement for timely and accurate information

Depository Services: A depository holds securities (like share,

debentures, bonds, Government securities, units etc.) of investors
in electronic form. Besides holding securities, a depository also
provides services related to transactions in securities. SHCIL has
been offering depository services since 1998 and is the largest
depository participants in India. DP services comprised of account
opening, modification of client details, processing settlement and
non-settlement related transactions, execution of pledge
instructions and demat of securities, etc.
Sub-Broking Services: SHCIL offers sub-broking operations
through its subsidiary company SHCIL Services Ltd (SSL) on the
Bombay Stock Exchange (BSE). SHCIL through SSL, provides
speedy, safe, reliable and affordable broking services to retail,
HNI and corporate clients, through its wide network of branches
spread across the country. The clients also have option of trading
online from anywhere through internet.

Vaults: High security Vaults (complying with the requirements of

the Securities and Exchange Board of India) use state-of-the-art

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technology, closed-circuit T. V. using hidden cameras, motion
detectors, access controls and a full-time security staff.
Certificates are held in customized, fire resistant ‘Modular Sliding
Storage Units’, with automated location tracking using bar codes
and audit trail.

E-Stamping: SHCIL is authorized by Government of India to act

as a Central Record Keeping agency for computerization of Stamp
Duty Administration System initially for a period of five years. To
implement this mandate, an agreement was executed between
SHCIL and Unitec Value Solutions Pvt. Ltd (a Singapore
incorporated company), in February 2007 for providing the
software solution and support for e- Stamping system in India in
association with M/s Crimson Logic Global Pvt. Ltd, Singapore. The
Corporation entered into an agreement with the Government of
Gujarat for implementation of stamping system in a phased
manner. This system is operational since February 2007 and
functioning. Satisfactorily SHCIL received mandates from the
Government of Karnataka, New Delhi and Maharashtra for
implementation of e-stamping and agreements are being
finalized. SHCIL has also initiated discussions with the
Government of Tamil Nadu, Andhra Pradesh and Pondicherry.

Distribution of Third party products: Stock Holding

Corporation has tied up with all the leading mutual fund
companies and it is also a corporate agent of Life Insurance
Corporation of India and The New India Assurance Company ltd
for promoting their Life and Non life insurance products.
SHCIL has well versed with regulatory norms/Capital markets
trends and latest updates. Thus take instant decisions in line with
the market. A client may move to a different place but he can get
the service from other branch. Because of good rapport with LIC
head office it has Pan India tie up.
It also distributes various other investment products like Capital
gain bonds, Debt instruments, Initial Public Offers, Govt. of India
Saving bonds and Fixed deposit schemes of certain reputed

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institutions. SHCIL also provides transfer services of Western
Union Money transfer.

Investment Advisory Services: The services provided by

SHCIL include market insight, covering overview of all markets,
morning report on Indian Equity market to retail investors,
comprehensive newsletter covering the daily news, advisory
services to select clients and Mutual Fund reports to investors.
The Investment Advisory Services Department (IASD) provides
support services on mutual fund products and also sub-broking
services to clients, based on wide ranging and in depth research
analysis. The Department also provides various types of inputs on
stock markets at periodic intervals to internal groups in the
organization, with a special focus on equity markets and mutual
fund schemes to enable them to disseminate the information to
clients, so that our clients can take informed decisions about
investment.

Technology: The Company has in house capability to address

its IT needs in the matter of software development and
maintenance, back office processing, database administration
and network maintenance. The Company has also engaged IDBI
Intech Ltd to help it identify gaps in capability and recruitment. IT
being key to success of our operations, the Company has made
significant investment in Technology and has
strengthened manufacture, Network devices & security systems.
The Company has constituted an Advisory Committee comprising
experts on Information Technology. The IT Advisory Committee is
expected to help the Company to continuously strengthen areas
in Information Technology (IT). The corporation’s Disaster
Recovery Center has become operational in respect of
institutional back office. The Corporation’s website www.shcil.com
provides a host of value added features to its clients. End of Day
reports, intra-day statement and other time-critical settlement
reports like Delivery Out and Pay Out receipts reports are made
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available to all registered clients through the website.

Asset Servicing : A dedicated Corporate Actions team to

ensure the timely forecast of all corporate actions & benefits
accruing on client holdings The handling of all instrument types
listed on both exchanges Bombay Stock Exchange & National
Stock Exchange, money market instruments (CPs & CDs), debt
instruments PTC’s (Pass through certificates) and even unlisted
securities. An exhaustive cross-country database of Corporate
Events, Book Closures, R&T Agents, Depositories, Stock
Exchanges as well as other industry-related information
assiduously built up by continuous tracking of Company,
Exchange & Depository announcements, using live feeds.

Loan Against Securities: SHCIL has tied up IDBI Bank Ltd for
providing its investors Loan against securities, this facilitates the
investor to pledge their securities.

Future Outlook
SHCIL played a major role when the physical securities were in
vogue. With the introduction of the depository system in the
country, SHCIL made a foray into the retail segment. It emerged
as the premier custodian and one of the largest Depository
Participants in the country. SHCIL aims to enlarge its role further
and emerge as a broad-based and dynamic financial institution in
the highly competitive sphere of financial intermediaries. SHCIL
aims to extend the E-stamping services in various offices across
the country.

2.3 Branch profile: Jaipur (JSEL)

Total number of Demat Accounts: 5346

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Total number of Trading Accounts: 350
Product Head 2008-09
Demat Account opened 118
Trading Account opened 43
Third Party Products mobilization 33.31 Lacs
Broking Turnover 52.85 Cr
Insurance Premium 3.5 Lacs
Billing Collection 15.61 Lacs
Number of Insurance Policies 10

Different Services Provided by SHCIL

Depository System

Introduction –
The earlier settlement system on Indian stock exchanges
was very inefficient as it was unable to take care of the transfer of
securities in a quick/speedy manner. Since, the securities were in
the form of physical certificates; their quick movement was again
difficult. This led to settlement delays, theft, forgery, mutilation
and bad deliveries and also to added costs. To wipeout these
problems, the Depositories Act 1996 was passed. It was formed
with the purpose of ensuring free transferability of securities with
speed, accuracy & security. It has been able to do so by:
i. Making securities of public limited companies freely
transferable, subject to
certain exceptions

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 ii. Dematerializing the securities in the depository mode
iii. Providing for maintenance of ownership records in a book
entry form.

For performing the above tasks, two depositories viz, NSDL &
CDSL have come up.
National Securities Depository Limited (NSDL) does the above
tasks for the trades done on NSE. It is a joint venture of:
i. IDBI (Industrial Development Bank of India Limited)
ii. NSE (National Stock Exchange)
iii. UTI (Unit Trust of India)

NSDL is the first depository to be set up in India. It was

registered by SEBI on June 7,1996

The second depository Central Depository Services Limited

(CDSL) has been promoted by Bombay Stock Exchange and Bank
of India. It was formed in February 1999. Both depositories have a
network of Depository participants (DPs) which are further
electronically connected to their clients. So, DPs act as a link
between the depositories and the clients.
The Depository system to some extent works like the banking
system. There is a central bank and the rules and regulations
related to the working of all the commercial, foreign, co-operative
and other types of banks are framed by the central bank. In order
to do the daily transactions, the investors open an account with
the associate banks, and not with the central one. Like an
investor can have a bank account with more than one bank,
similarly one can have more than one Demat Account.
As a broker represents their investors, and can trade on their
behalf either on the stock exchange or off-market. Similarly, a
Depository Participant (DP) is the representative (agent) of the
investor in the depository system providing the link between the
Company and the client through the Depository. The client’s

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Depository Participant will maintain his securities account
balances and intimate the status of the holding from time to
time.

Depository Participants of India

SHCIL started DP services in 1998 and is the largest
depository participants in India. Over 191 of our networked
branches it ensures availability wherever required. Across the
country, thirteen Depository Participant Machines (DPMs)
connected to NSDL and seven connected to CDSL ensure fast and
direct processing of your instructions.

A depository participant otherwise known as a DP has been an

integral aspect of the Indian stock markets as it has been the
platform for hastening the growth of dematerialization in the
country.
It provides for seamless transactions of securities in the stock
markets. A leading depository participant of the country is SHCIL.
However, lately, several depository participants have become
active in India and provide a healthy competition for enhancing
service standards.

Benefits of Depository Participants

PIBM, Pune Page 14

 • Bad delivery eliminated
• Immediate transfer of shares
• No stamp duty on such transfers
• Elimination of risks that is normally associated in dealing
with Physical certificates - loss / theft / mutilation due to
careless handling / forgery / etc.
• Reduced transaction co
• No stamp duty on transfer of securities
• Reduction in paperwork involved in transfer of securities
and in transaction cost
• Nomination facility
• Holding investments in equity and debt instruments in a
single account

How do Depository Participants Operate?

Depository interacts with its clients / investors through its agents,

called Depository Participants normally known as DPs.
For any investor / client, to avail the services provided by the
Depository, has to open Depository account, known as Demat A/c,
with any of the DPs.

Services offered by Depository Participants

• Dematerialization (usually known as demat) is converting
physical certificates to electronic form

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 • Dematerialization, known as remat, is reverse of demat, i.e.
getting physical certificates from the electronic securities
• Transfer of securities, change of beneficial ownership
• Settlement of trades done on exchange connected to the
Depository
• Pledge / Hypothecation of demat shares, viz. Loan against
shares
• Electronic credit in public offering of the Companies
• Non - Cash corporate benefits, viz. Bonus / Rights - direct
credit into electronic form

Demat Account Opening:

A demat account are opened on the same lines as that of a

Bank Account. Prescribed Account opening forms are available
with the DP, needs to be filled in. Standard Agreements are to be
signed by the Client and the DP, which details the rights and
obligations of both parties. Along with the form the client requires
to attach Photographs of Account holder, Attested copies of proof
of residence and proof of identity needs to be submitted along
with the account opening form.
In case of corporate clients, additional attachments required are -
true copy of the resolution for Demat a/c opening along with
signatories to operate the account and true copy of the
Memorandum and Articles of Association is to be attached.

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Demat Services Provided SHCIL
Stock Holding Corporation of India offers large variants of
Demat accounts, with various tariff plans. As per the
requirements of clients it offers 135 types Demat account.
However for comparative analysis, only those tariff plans have
been included which are popular in Jaipur.
In Jaipur the most popular is CD5 for individuals. The Details CD5
are shown below in the table Along with this SHCIL have Combo
Tariff plans CTA, CTB, CTC and CTD. These plan include both
demat account along with trading account. For the requirements
of NRI we do have CN5 and CN7. Again it offers DA1, DA2
and DA3 in which the charges are taken at the time of account
opening only and these are for 3years, 4years and 5 years.

SCHIL offers demat account LA1 which is life time plus

refundable plan.
CD 5
Particulars Investor Trader
Account opening charges Nil Nil
Kit charge Rs.30 Rs.30
Stamp Duty Rs.100 Rs.100
Annual Rs.600 Rs.1200
maintenance charge w.e.f
April 2009.
Purchase (Market and Off Nil Nil
Market)
Sale (Market and Off 0.05% (minimum Rs.25) 0.03% plus
Market) plus NSDL/CDSL NSDL/CDSL
Charges Charges

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Invocation Rs.50 Rs.50
Late Transaction charges Rs.10 (per transaction) Rs.10 (per
transaction)
Total amount payable Rs.900(Rs.100 credited Rs.1500(Rs.100
while opening account to A/c) credited to A/c)

Other plans Offered

LA1*
Particulars Tariff
Amount payable at the time of Rs.7000 for life time.
account opening
Sale (Market and Off Market) 0.05% (minimum Rs.25) plus
NSDL/CDSL Charges
Invocation Rs.50 (per transaction)
Late Transaction charges Rs.10 (per transaction)
Refundable amount after one yr. Rs.6000
opening

COMBO TARIFF PLAN*

Particulars CTA CTB CTC CTD
Amount Rs. 751 Rs.526 Rs. 3500, Non Rs. 1200
payable at the Refundable
time of One Time Tariff
account (for maximum
opening 10 years)
Account Nil Nil Nil Nil
opening
charge
Annual Rs.600 Rs. 350 Nil Rs. 1200
maintenance
charge

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 Sale (Market 0.05% 0.05% 0.05% 0.03% plus
and Off (minimum (minimum (minimum NSDL/CDSL
Market) Rs.25) plus Rs.25) plus Rs.25) plus Charges
NSDL/CDSL NSDL/CDSL NSDL/CDSL
Charges) Charges Charges
Stamp Duty As applicable As applicable As applicable As
applicable

For NRI* Clients

CN 5 (Overseas CN7
Communication (Indian
Address) Communication
Address)
Particulars NSDL CDSL NSDL CDSL
Account opening Nil Nil Nil Nil
Annual maintenance Rs.1500 Rs.1500 Rs.750 Rs.750
charge
Total Amount Payable
during A/c opening
*For purchase transaction no charges are imposed.

Popular Tariff plans of Banks

Transaction Charges 0.04% or 0.04% of the Rs. 100/- Rs.25/-Per Rs.0.06%

Minimum value subject per debit Trans. (Min
Rs.10/ to minimum Rs.17)
Rs.6/- of Rs. 25/-
Charges per
transaction

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Chq Book Charges Rs.25 per Rs.2/- per Rs. 20/ Nil NIL
10

Depository NSDL/CDSL NSDL/CDSL NSDL NSDL NSDL

Participants

AMC Rs.550/- if Rs. 500/- p.a Rs. 500/- 300 P.A. Rs.250/-
the client for HDFC p.a. for (Upfront) for only
has opted bank Axis Citi bank
email customer & Bank
facility, Rs.600/- for Custome
otherwise others rs & Rs.
it is 600/-
Rs.500/- p.a. for
Non Axis
Bank
Custome
rs
Account Op. Nil Rs. 100/- Rs. 100/- NIL NIL
Charges towards (Stamp
Stamp Duty for
Charges agreeme
nt)

Name O f ICICI Bank HDFC Bank AXIS Allahabad Citibank

Organization Ltd. Ltd. Bank Bank Ltd.
Ltd.

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Pledge creation 0.02% or Nil Rs. 100/- Rs.50/-per NIL
confirmation Minimum per trans.
Rs.15/ transacti
on

Pledge Creation 0.02% or 0.04% of the Rs. 100/- Rs.100/- NIL

Minimum value subject per per trans.
Rs.15/- to minimum transacti
of Rs. 25/- on
per
transaction
No. of Accounts No Limit 3 3 2

Remat Charges Rs.20/- and As per DP Rs. 125/- Rs.25/- Rs.50/-

DP actual per Per
Charges A request Certificate
fee of
Rs.10/- for
every
hundred
Demat Charges Rs.35/- and Rs. 3/- per Rs. 100/- Rs.3/- per Rs.50/-
Rs.2/- Per certificate + per Certificate
Certificate Rs. 35/- per request ,
Dematerializa Min.Rs.25/
tion -

Name O f ICICI Bank HDFC Bank AXIS Allahabad Citibank

Organization Ltd. Ltd. Bank Bank Ltd.
Ltd.

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Advance/Deposit Rs.2500/- Nil NIL NIL
,If client is
not having
bank
account
with ICICI
BANK

Failed Instruction Rs.30/- Rs. 10/- Rs.25/- NIL

Charges per Per Trans.
rejected •
instructio
n

Pledge Innovation 0.02% or 0.04% of the Rs. 100/- NIL NIL

Minimum value subject per
Rs.15/- to minimum transacti
of Rs. 25/- on
per
transaction
Pledge Closure 0.02% or Nil Nil Rs.50/-per NIL
Confirmation Minimum trans
Rs.15/-

Pledge Closure 0.02% or 0.04% of the Rs. 50/- Rs.50/-per 0.02%

Minimum value subject per trans.
Rs.15/- to minimum instructio
of Rs. 25/- n
per
transaction
Name O f ICICI Bank HDFC Bank AXIS Allahabad Citibank
Organization Ltd. Ltd. Bank Bank Ltd.
Ltd.

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 Research Methodology

The methodology followed is through collection of information in

respect to Stock Holding Corporation of India. Initially the
information available within the organization is gathered and
thereafter comparison of DP services of SHCIL with the banks has
been done. For comparison three private banks viz. ICICI Bank
ltd., HDFC Bank Ltd., Axis Bank Ltd, one public sector banks viz.
Allahabad Bank and one foreign bank Citibank has been taken.
And for studying the investment behavior in Mutual funds, a
proper survey is done through well defined questionnaire. The
data collected is analyzed through statistical tool using analysis
software.
1.3 Sources of Data
Primary Data :
• Demat Account holder
• Questionnaire
Secondary Data :
• Research material of Stock Holding Corporation of India.
• Some useful websites like www.nsdl.com , www.csdl.com, and
websites.

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 • Magazines, journal, etc.

RECESSION

Introduction

RECESSIONS are the result of reduction in the demand of

products in the global market. Recession can also be
associated with falling prices known as deflation due to lack of
demand of products. Again, it could be the result of inflation or
a combination of increasing prices and stagnant economic
growth in the west.

Recession in the West, especially the United States, is a

very bad news for our country. Our companies in India have
most outsourcing deals from the US. Even our exports to US
have increased over the years. Exports for January have
declined by 22 per cent. There is a decline in the employment
market due to the recession in the West. Some companies have
laid off their employees and there have been cut in promotions,
compensation and perks of the employees. Companies in the
private sector and government sector are hesitant to take up
new projects. And they are working on existing projects only.

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Projections indicate that up to one crore persons could lose
their jobs in the correct fiscal ending March. The one crore
figure has been compiled by Federation of Indian Export
Organizations (FIEO), which says that it has carried out an
intensive survey. The textile, garment and handicraft industry
are worse affected. Together, they are going to lose four million
jobs by April 2009, according to the FIEO survey.

IT industries, financial sectors, real estate owners, car industry,

investment banking and other industries as well are confronting
heavy loss due to the fall down of global economy. Federation
of Indian chambers of Commerce and Industry (FICCI) found
that faced with the global recession, inventories industries like
garment, gems, textiles, chemicals and jewellery had cut
production by 10 per cent to 50 per cent.

What Is Recession?
Are we facing a recession or not? Yes, for the simple
reason that not only our neighbors but our friends are
unemployed. There is less of business talk and more billing
worries. Transitory recessions are good for the economy, as it
tends to stabilize the prices. It allows run away bullish
companies to slow down and take stock. There is a saying,
‘when it’s tough the tough get going’. The weaker companies
will not survive the brief recession also. Stronger companies
will pull through its resources. So when is it time to worry?
When you are facing a foreclosure, when the chips are down
and out and creditors file cases for recovery.

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 In its early stage it can be controlled in a methodical
manner. Experience helps to avert total collapse. Unchecked, it
leads to severe depression. It is time to close shop completely.
It is a total state of irrevocable economic failure. When a
country is doing well all round its Gross Domestic Product (GDP)
is on the rise. In a recession, the overall economic indicators
reveal severe changes, which typically includes a sharp rise or
fall in prices (inflation or deflation). If recession continues for an
extended period of time, it is called a depression. Firms face
closures when they go through recession and are not able to
recover from losses. If, at this time, they are not able to sustain
their prices and stocks then there is more trouble. Even when
the recession period gets over, they will not be able to do well.
Financial institutions are overwhelmed with worried investors.
Consultants are trying to calm down companies who have great
risks at the stock exchanges. In a country, which lives and
thrives on credit bills and mortgage loans for just about
everything, there is cause to get worried. The stock exchanges
have always been indicative of the recession. The individual
investors are still safe. But the professionals have to bear the
burden of recession.

Recession can be described as following points;

➢ A recession is a contraction phase of the business cycle.

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 ➢ The official agency in charge of declaring that the economy is in a state
of recession is the National Bureau of Economic Research (NBER).
➢ They define recession as a "significant decline in economic activity
lasting more than a few months“, which is normally visible in real GDP,
real income, employment, industrial production, and wholesale-retail
sales.
➢ For this reason, the official designation of recession may not come until
after we are in a recession for six months or even longer.
➢ Some economists also suggest that a recession occurs when the natural
growth rate in GDP is less than the average of 2%. Typically, a normal
economic recession lasts for approximately 1 year.
➢ American newspapers often quote the rule of thumb that a recession
occurs when real gross domestic product (GDP) growth is negative for
two or more consecutive quarters.
➢ This measure fails to register several official (NBER defined) US
recessions.

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What Causes of Recession?

1. Subprime mortgage crisis: The subprime mortgage

crisis is an ongoing financial crisis triggered by a dramatic rise
in mortgage delinquencies and foreclosures in the United
States, with major adverse consequences for banks and
financial markets around the globe. The crisis, which has its
roots in the closing years of the 20th century, became

Apparent in 2007 and has exposed pervasive weaknesses

in financial industry regulation and the global financial system.
The risks to the broader economy created by the housing
market downturn and subsequent financial market crisis were
primary factors in several decisions by central banks around
the world to cut interest rates and governments to implement
economic stimulus packages. When USA house prices began to
decline in 2006-07, mortgage delinquencies soared, and
securities backed with subprime mortgages, widely held by
financial firms, lost most of their value. Effects on global stock
markets due to the crisis have been dramatic. Between 1
January and 11 October 2008, Losses in other countries have
averaged about 40%. Losses in the stock markets and housing
value declines place further downward pressure on consumer
spending, a key economic engine.

2. High Oil Prices: The rise in oil prices has become a very
pressing issue. Certainly, nobody has to be reminded that
crude was hovering just below $150 per barrel, while gasoline
has surpassed $6 per gallon on average around the nation. The

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widely accepted explanation for oil prices' recent steep climb is
strong demand. The global economy is firing on all cylinders,
and that US and India have emerged as major consumers.

3. Inflation, the silent killer: Most likely, the prime

cause has been the important role of productivity growth in
developing countries, especially the large-sized countries like
US and India. With Africa and Latin America now joining the
development party, subdued world inflation is more likely than
not. World inflation is broadly composed of three commodities:
energy, agriculture and metals (both precious and other
metals). In India only inflation rate touched to just below 13% in
mid of 2008. A reasonable speculation is that this recent burst
in prices has more to do with old-fashioned speculation than
even older-fashioned fundamentals. In this regard, the recent
hysteria pertaining to the Indian rupee is relevant. The normal
inflation rate in developed countries 1% to 4% typically;
developing countries 5% to 20% typically; national inflation
rates vary widely in individual cases, from declining prices in
Japan to hyperinflation in one Third World country (Zimbabwe),
inflation rates have declined for most countries for the last
several years, held in check by increasing international
competition from several low wage countries (2005 est.) .In
2008, the prices of many commodities, notably oil and food, got
so high to cause genuine economic damage, threatening
stagflation and a reversal of globalization .

4. Liquidity crisis: From late 2007 through September

2008, before the official October 3rd bailout, there was a series
of smaller bank rescues that occurred which totaled almost

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$800 billion. In the summer of 2007, Countrywide Financial
drew down $11 billion line of credit and then secured an
additional $12 billion bailout in September. This may be
considered the start of the crisis. In mid-December 2007,
Washington Mutual bank cut more than 3,000 jobs and closed
its subprime mortgage business. In mid-March 2008, Bear
Stearns was bailed out by a gift of $29 billion non-recourse
Treasury bill debt assets. In early July 2008, depositors at the
Los Angeles offices of Indy Mac Bank frantically lined up in the
street to withdraw their money. On July 11, Indy Mac, a spin-off
of Countrywide, was seized by federal regulators - and called
for a $32 billion bailout. The mortgage lender succumbed to the
pressures of tighter credit, tumbling home prices and rising
foreclosures. That day the financial markets plunged as
investors tried to gauge whether the government would
attempt to save mortgage lenders Fannie Mae and Freddie
Mac. The two were placed into conservator ship on September
7, 2008. On September 16 2008, news emerged that the
Federal Reserve may give AIG an $85 billion rescue package;
on September 17, 2008, this was confirmed. The terms of the
rescue package were that the Federal Reserve would receive
an 80% public stake in the firm. The biggest bank failure in
history occurred on September 25 when JP Morgan Chase
agreed to purchase the banking assets of Washington Mutual
The year 2008, as of September 17, has seen 81 public
corporations file for bankruptcy in the United States, already
higher than the 78 in 2007. Lehman Brothers being the largest
bankruptcy in U.S. history also makes 2008 a record year in
terms of assets with Lehman's $691 billion in assets all past
annual totals. The year also saw the ninth biggest bankruptcy
with the failure of Indy Mac Bank. The Wall Street Journal states

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that venture capital funding has slowed down which in the past
led to unemployment and slowed new job creation.

5. Large Trade Deficit Spells More Difficulties

Ahead for US Economy: Since December 2001, the
monthly trade deficit has increased $37.6 billion, and
petroleum products account for 47 percent of this increase. The
growing U.S. appetite for low-cost consumer goods, capital
goods, and industrial materials and components, especially
from Asia, account for more than half of the growth of the trade
deficit. This situation is likely to become worse in the months
ahead. Crude oil prices, after falling in November, have been
rising again, and the dollar has strengthened in recent months,
making most imports cheaper. In 2005, business and political
conditions in Europe weakened, and prospects for the Japanese
economy improved only modestly; consequently, the dollar
rose against industrial country currencies. The dollar remains
as much as 40 percent overvalued against the Chinese Yuan
and other Asia currencies.

So, Causes of Recession can be summarized as below;

• An economy which grows over a period of time tends to slow down the
growth as a part of the normal economic cycle.

• Investors spend less as they fear stocks values will fall and
thus stock markets fall on negative sentiment.

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 • An economy typically expands for 6-10 years and tends to go into a
recession for about six months to 2 years.
• A recession normally takes place when consumers lose confidence in the
growth of the economy and spend less.
• This leads to a decreased demand for goods and services, which in turn
leads to a decrease in production, lay-offs and a sharp rise in
unemployment.
• Investors spend less as they fear stocks values will fall and thus stock
markets fall on negative sentiment.

History of recessions

Global recessions
There is no commonly accepted definition of a global recession,
IMF regards periods when global growth is less than 3% to be
global recessions. The IMF estimates that global recessions
seem to occur over a cycle lasting between 8 and 10 years.
During what the IMF terms the past three global recessions of

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the last three decades, global per capita output growth was
zero or negative.
Economists at the International Monetary Fund (IMF) state that
a global recession would take a slowdown in global growth to
three percent or less. By this measure, three periods since
1985 qualify: 1990-1993, 1998 and 2001-2002.
According to economists, since 1854, the U.S. has encountered
32 cycles of expansions and contractions, with an average of
17 months of contraction and 38 months of expansion.
However, since 1980 there have been only eight periods of
negative economic growth over one fiscal quarter or more, and
four periods considered recessions:
• January-July 1980 and July 1981-November 1982: 2 years
total
• July 1990-March 1991: 8 months
• March 2001-November 2001: 8 months
• December 2007-current: 15 months as of March 2009
From 1991 to 2000, the U.S. experienced 37 quarters of
economic expansion, the longest period of expansion on
record.

Current recession in some countries

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Official economic data shows that a substantial number of
nations are in recession as of early 2009. The US entered a
recession at the end of 2007, and 2008 saw many other nations
follow suit. United States
The United States housing market correction (a consequence of
United States housing bubbles) and subprime mortgage crisis
has significantly contributed to a recession.
The 2008/2009 recession is seeing private consumption fall for
the first time in nearly 20 years. This indicates the depth and
severity of the current recession. With consumer confidence so
low, recovery will take a long time. Consumers in the U.S. have
been hard hit by the current recession, with the value of their
houses dropping and their pension savings decimated on the
stock market. Not only have consumers watched their wealth
being eroded – they are now fearing for their jobs as
unemployment rises.
U.S. employers shed 63,000 jobs in February 2008, the most in
five years. Former Federal Reserve chairman Alan Greenspan
said on April 6, 2008 that "There is more than a 50 percent
chance the United States could go into recession.". On October
1, the Bureau of Economic Analysis reported that an additional
156,000 jobs had been lost in September. On April 29, 2008,
nine US states were declared by Moody's to be in a recession.
In November 2008 Employers eliminated 533,000 jobs, the
largest single month loss in 34 years. For 2008, an estimated
2.6 million U.S. jobs were eliminated.
Although the US Economy grew in the first quarter by
1%, by June 2008 some analysts stated that due to a
protracted credit crisis and "rampant inflation in
commodities such as oil, food and steel", the country
was nonetheless in a recession. The third quarter of
2008 brought on a GDP retraction of 0.5% the biggest

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decline since 2001. The 6.4% decline in spending
during Q3 on non-durable goods, like clothing and food,
was the largest since 1950. A Nov 17, 2008 report from
the Federal Reserve Bank of Philadelphia based on the
survey of 51 forecasters suggested that the recession
started in April 2008 and will last 14 months. They
project real GDP declining at an annual rate of 2.9% in
the fourth quarter and 1.1% in the first quarter of 2009.
These forecasts represent significant downward
revisions from the forecasts of three months ago.
A December 1, 2008, report from the National Bureau
of Economic Research stated that the U.S. has been in
a recession since December 2007 (when economic
activity peaked), based on a number of measures
including job losses, declines in personal income, and
declines in real GDP.

Other countries

A few other countries have seen the rate of growth of

GDP decrease, generally attributed to reduced liquidity,
sector price inflation in food and energy, and the U.S.
slowdown. These include the United Kingdom, Canada,
Japan, Australia, China, India, New Zealand and the
Euro zone. In some, the recession has already been
confirmed by experts, while others are still waiting for
the fourth quarter GDP growth data to show two
consecutive quarters of negative growth. India along

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with China is experiencing an economic slowdown but
not a recession.

Current crisis in the US

The defaults on sub-prime mortgages (home loan

defaults) have led to a major crisis in the US. Sub-prime
is a high risk debt offered to people with poor credit
worthiness or unstable incomes. Major Banks have
landed in trouble after people could not pay back loans.

The housing market soared on the back of easy

availability of loans. The realty sector boomed but
could not sustain the momentum for long, and it
collapsed under the gargantuan weight of crippling loan
defaults. Foreclosures spread like wildfire putting the
US economy on shaky ground. This, coupled with rising
oil prices at $100 a barrel, slowed down the growth of
the economy.

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 Past recessions in the US

The US economy has suffered 10 recessions since the

end of World War II. The Great Depression in the United
was an economic slowdown, from 1930 to 1939. It was
a decade of high unemployment, low profits, low prices
of goods, and high poverty.

The trade market was brought to a standstill, which

consequently affected the world markets in the 1930s.
Industries that suffered the most included agriculture,
mining, and logging.

In 1937, the American economy unexpectedly fell,

lasting through most of 1938. Production declined
sharply, as did profits and employment. Unemployment
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jumped from 14.3 per cent in 1937 to 19.0 per cent in
1938.

The US saw a recession during 1982-83 due to a tight

monetary policy to control inflation and sharp
correction to overproduction of the previous decade.
This was followed by Black Monday in October 1987,
when a stock market collapse saw the Dow Jones
Industrial Average plunge by 22.6 per cent affecting
the lives of millions of Americans.

The early 1990s saw a collapse of junk bonds and a

financial crisis.
The US saw one of its biggest recessions in 2001,
ending ten years of growth, the longest expansion on
record.

From March to November 2001, employment dropped

by almost 1.7 million. In the 1990-91 recessions, the
GDP fell 1.5 per cent from its peak in the second
quarter of 1990. The 2001 recession saw a 0.6 per cent
decline from the peak in the fourth quarter of 2000.

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The dot-com burst hit the US economy and many
developing countries as well. The economy also
suffered after the 9/11 attacks. In 2001, investors'
wealth dwindled as technology stock prices crashed.

Impact of an American Recession

on India

Indian companies have major outsourcing deals from

the US. India's exports to the US have also grown
substantially over the years. The India economy is likely
to lose between 1 to 2 percentage points in GDP growth
in the next fiscal year. Indian companies with big
tickets deals in the US would see their profit margins
shrinking.

The worries for exporters will grow as rupee

strengthens further against the dollar. But experts note

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that the long-term prospects for India are stable. A
weak dollar could bring more foreign money to Indian
markets. Oil may get cheaper brining down inflation. A
recession could bring down oil prices to $70.

The whole of Asia would be hit by a recession as it

depends on the US economy. Even though domestic
demand and diversification of trade in the Asian region
will partly counter any drop in the US demand, one
simply can't escape a downturn in the world's largest
economy. The US economy accounts for 30 per cent of
the world's GDP.

The only silver lining is that the recession will

happen slowly, probably in six months or so. As of now,
IT and IT-enabled services, textiles, jewellery,
handicrafts and leather segments will suffer losses
because of their trade link. Certain sections of
commodities could face sharp impact due to the
volatile nature of these sectors. C.J. George, managing
director, Geojit Financial Services, says profits of lots of
re-export firms may be affected. Countries like China
import commodities from India do some value-addition
and then export them to the US.

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The IT sector will be the worst hit as 75 per cent of its
revenues come from the US. Low demand for services
may force most Indian Fortune 500 companies to slash
their IT budgets. Zinnov Consulting, a research and
offshore advisory, says that besides companies from
ITeS and BPO, automotive components will be affected.
During a full recession, US companies in health care,
financial services and all consumers demand driven
firms are likely to cut down on their spending. Among
other sectors, manufacturing and financial institutions
are moderately vulnerable. If the service sector takes a
serious hit, India may have to revise its GDP to about 8
to 8.5 per cent or even less.

US Trade with India

Month Export Import Balance

Jan, 2008 1078.4 2306.7 -(1228.3)

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 Feb, 2008 1505.5 2118.5 -(613.0)
Mar, 2008 1644.7 2254.7 -(610.0)
Apr, 2008 1105.3 2125.8 -(1020.4)
May, 2008 1493.5 2190.3 -(696.8)
June, 2008 2047.3 1869.2 + 178.1
July, 2008 1986.6 2069.7 -(83.1)
Aug, 2008 1864.4 2210.6 -(346.2)
Sep, 2008 2032.8 2398.5 -(365.7)
Oct, 2008 1640.5 2452.4 -(811.8)
Total 16399.1 21996.3 -(5597.2)

A slowdown in the US economy is bad news for India. Indian

companies have major outsourcing deals from the US. India's
exports to the US have also grown substantially over the years.
Indian companies with big tickets deals in the US are seeing
their profit margins shrinking. More people have sold the
shares. In the Indian share market than they bought in the
recent weeks. This has added to the fall of sensex to lower
points. One danger meanwhile is of a dip in the employment
market. There is already anecdotal evidence of this in the IT
and financial sectors, and reports of quiet downsizing in many
other fields as companies cut costs. More than the downsizing

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itself, which may not involve large numbers, what this implies
is a significant drop in new hiring -- and that will change the
complexion of the job market.

Many companies has laid off their staffs, the number of

tourists inflow to India has come down, companies have cut
down compensations and perks etc, government and other
private companies are reluctant in starting new ventures and
starting new projects etc.

Projects that are halfway to completion, or companies that

are stuck with cash flow issues on businesses that are yet to
reach breakeven, will run out of cash. One of the casualties
this time could be real estate, where building projects are half-
done all over the country and in this tight liquidity situation
developers find it difficult to raise finances.

The only way out of the mess is for builders to drop prices,
which had reached unrealistic levels and assumed the
characteristics of a property bubble, so as to bring buyers back
into the market, but there is not enough evidence of that
happening. Consumers are also frozen in this sudden glare of
the headlights.

What the RBI needs to do, as events unfold, is to neutralize

the outflow of FII money by unwinding the market stabilization
securities that it had used to sterilize the inflows when they
happened. This will mean drawing down the dollar reserves, but
that is the logical thing to do at such a time. If done sensibly, it
would prevent a sudden tightening of liquidity, and also not

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allow the credit market to overshoot by taking interest rates up
too high.

The falling rupee (against the dollar, more than against

other currencies) will mean that exporters who felt squeezed by
the earlier rise of the currency can breathe easy again, though
buyers overseas may now become more scarce. And for
importers, the oil price fall (and the general fall in commodity
prices) will neutralize the impact of the dollar's decline against
the rupee.

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 Consequences of US recession on India
job market

Worst affected because of US recession will be the service

industry of India. Under service industries come BPO, KPO, IT,
etc. Service industry contributes about 52% to India's GDP
growth. Now if that is going to get hurt then it will also hurt
India's overall growth but very slightly. India is not going to
face a major impact due to US recession. People may say that
there is going to be a huge job loss due to recession. and will
cite the example of TCS firing about 500 employees but these
were employees who didn’t perform and for cost cutting one
have to reduce Non performing asset and that exactly what has
been done. There is no threat to the skilled people. According
to NASSCOM India will have a shortage of about 5 million skilled
people in IT/ITeS. So there are lots of opportunities.
Apart from this India's travel, tourism and power industry is
going to grow at a better rate. This is again a good sign. India
has a huge population so a huge consumer base so we don’t
have to always depend on US for our growth. India's GDP is
expected to grow at the rate of 8.5-8.9 % which is again way
above the growth rate of US and only second highest in the
world after China.

This recession gives us opportunity to be innovative and to

think out of box so that the US directly doesn’t affect our robust
growth.

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10 Indian industries to do well during recession
In the current global economic slowdown, every sector of
business is being affected and is witnessing a hard time. But
IKON Marketing Consultants reports that in India there are few
sectors which will grow in this adverse situation.
AS EVERY business sector is affected by present global crisis
and everybody is talking of slowdown in business, still in India
there are few sectors which will grow in this adverse situation.
Let’s have a look.

1. Food
No one can survive without basic food material like milk,
vegetables and drinking water. Food processing companies will
not be affected much and rather will earn profits by increasing
the prices. These are the basic needs which we as a common
man cannot produce by our self.
According to Ministry of Food Processing Industry (MFPI), the
food processing industry in India was seeing growth even as
the world was facing economic recession. According to the
minister, the industry is presently growing at 14 per cent
against six to seven per cent growth in 2003–04.The Indian
food market is estimated at over US$ 182 billion and accounts
for about two thirds of the total Indian retail market. Further,
the retail food sector in India is likely to grow from around US$
70 billion in 2008 to US$ 150 billion by 2025
2. Railway
As the aviation sector has been affect much badly and resulting
in sharp rise in the air ticket rates the frequent travelers’ will
prefer railways to cut the cost of traveling and this will result in

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increased traffic in railways and long queues at railway booking
counters. The freight traffic of Indian Railways has continued to
grow in the last few months, albeit at slow pace, indicating only
marginal impact of the global recession on the Indian economy.
The railways registered 13.87 per cent growth in revenue to Rs
57,863.90 crore in the first nine months ended December 31,
2008. The railways have enhanced freight revenue by
increasing its axle loading, improving customer services and
adopting an innovative pricing strategy.

3. PSU Banks
As seen in the private sector much of the job cuts due to global
slowdown, it’s the public sector undertaking (PSU) banks which
gained much confidence due to job safety and security. More
and more people are likely to turn towards government
institutions, particularly banks in the quest for safety and
security.
A report "Opportunities in Indian Banking Sector", by market
research company, RNCOS, forecasts that the Indian banking
sector will grow at a healthy compound annual growth rate
(CAGR) of around 23.3 per cent till 2011.

4. Education
As education is considered as the basic necessity and in India it
is seen as a long term investment by parents and with respect
to the demand still there is a huge supply gap. The craze to
study in foreign university among the Indian youth still alive
which will prompt foreign education institute to target India
provided vast young population willing to join. We will see more
and more foreign educational institutions coming up in India in
recent coming years.

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Huge government as well as private investment is likely to flow
into the Indian educational system. D E Shaw, a US$ 36 billion,
global private equity firm is planning to invest around US$ 200
million in the Indian education sector.

5. Telecom
People will not stop to communicate with each other due to
global crises rather it has been seen that it will increase much
particularly with mobile communication. With cheap cell phones
available in the Indian market and cheaper call rates, the sector
has become the necessity and primary need of everyday life.

Telecom sector, according to industry estimates, year 2008

started with a subscriber base of 228 million and will likely to
end with a subscriber base of 332 million – a full century. The
telecom industry expects to add at least another 90 million
subscribers in 2009 despite of recession. The Indian
telecommunications industry is one of the fastest growing in
the world and India is projected to become the second largest
telecom market globally by 2010.

6. Health care
India in case of health care facilities still lakes the adequate
supply. In health care sector also there is huge gap between
demand and supply at all the levels of society. Still there are so
many urban areas were you could hardly find any multi
specialty hospital. And in case of metros the market sentiments
itself created a need of psychological consultation.
Healthcare, which is a US$ 35 billion industry in India, is
expected to reach over US$ 75 billion by 2012 and US$ 150
billion by 2017. The healthcare industry is interestingly poised

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as it strives to emerge as a global hub due to the distinct
advantages it enjoys in clinical excellence and low costs.

7. M&A & Marketing Consultants

As in the current business slow down survival will be the main
focus, the marketing and management consultants will be
called for to reduce the costs and to show the ways to survive
and stay in market. Others may join hands to fight with this
situation together will call for the Marketing & M&A consultants.
In a booming market there are growth strategies and M&A
opportunities to advise on. When businesses are cutting back,
consultancies will be right there to help clients decide where to
wield the axe.
According to Ministry of Commerce and Industry’s estimation,
the current size of consulting industry in India is about Rs
10000 crores including exports and is expected to grow further
at a CAGR of approximately 25 per cent in next few years.

8. Media and Entertainment

In current bad times, where people are losing jobs and getting
enough time to watch TV, they will seek entertainment at home
and hence advertising revenues will increase for the
commercial channels. Also businesses like production of
religious texts and religious materials, religious channels will do
well. The TRP of religious channels will increase compare to the
other entertaining/commercial channels.
According to a report published by the Federation of Indian
Chambers of Commerce and Industry (FICCI), the Indian M&E
industry is expected to grow at a compound annual growth rate
(CAGR) of 18 per cent to reach US$ 23.81 billion by 2012.
According to the PWC report, the television industry was worth
US$ 5. 48 billion in 2007, recording a growth of 18 per cent
over 2006. It is further likely to grow by 22 per cent over the
next five years and be worth US$ 12. 34 billion by 2012.

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How the Government Tackles Recession

• Tax cuts are the first step that a government fighting recessionary trends
or a full-fledged recession proposes to do.
• The government also hikes its spending to create more jobs and boost the
manufacturing and services sectors and to prop up the economy.
• The government also takes steps to help the private sector come out of the
crisis.
• In the current case, the Bush

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 • Initial estimates of the cost of the Treasury bailout proposed by the Bush
Administration's draft legislation (as of September 19, 2008) were in the
range of $700 billion to $1 trillion U.S. dollars.
• President George W. Bush asked Congress on September 20, 2008 for the
authority to spend as much as $700 billion to purchase troubled mortgage
assets and contain the financial crisis.

• The crisis continued when the United States House of Representatives

rejected the bill.
• The bill was eventually passed by the Senate and the House but the stock
market continued to fall nevertheless

STEPS TAKEN BY GOVT. AND RBI

The central bank even cut its benchmark repo rate by 150
basis points (bps) to 7.5% on October 19 in an attempt to get
some of that money moving out of the bank vaults. Still no go.
The RBI recently turned up the thermostat once more, this time
to prod banks to start lending at reduced interest rates. It cut
its benchmark repo and reverse rate by 100 bps. But, again,

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there’s hardly any movement. The banks are still carting their
surplus cash over to the RBI and dumping it there for
safekeeping, for even as a low a return as 5%. Take a look at
the money being tipped over at the RBI window. For the first
five days of the month, till the RBI cut the rates, banks plunked
Rs 243,310 crore with the Reserve Bank, for a return of only
6%. Over the next three working days, banks again deposited
Rs 84,635 crore with the central bank, for a return of just 5%.
The total — for just eight days — works out to over Rs 327,000
crore. In effect, this means banks are still wary of lending to
corporate, despite the sea of liquidity and rate cuts unleashed
by the central bank. This also then conveys how banks are still
uncertain about the future and that they are doubtful about the
ability of their corporate clients to pay up in time. HERE’S an
example a public sector unit was able to issue five-year bonds
to banks with a coupon of 9.33%. Around the same time, one of
the Top five India Inc companies also borrowed three year
money, but at 10.10%. Clearly, banks are willing to take a risk
on the government, even if it is a subsumed sovereign
guarantee, but not on even AAA-rated private companies.
Banks have not forgotten the nightmares of the early 1990s,
when bank NPAs ruled around 10-14%. This time, despite the
prodding from the government and the central bank, they are
unwilling to stick their necks out. The RBI has allowed banks to
restructure loans a euphemism for looking the other way when
a loan turns bad that might in ordinary times have been called
for stricter treatment. But, the banks are still not biting. The
problem also seems to be in the system’s liquidity absorption
capacity. Whatever steps the government takes at the moment
such as, providing cheap cash to corporate through a variety of
refinance windows — not only are banks reluctant to lend, even
corporate are loath to load up their balance sheets with fresh

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debt. Many of them are drawing down their existing credit lines
with banks emboldened somewhat by the new restructuring
space to finish existing projects but are unwilling to bet on new
projects. With aggregate demand having fallen, India Inc is also
contending with reduced top line and bottom line projections.
In such a scenario, they may not be in a mood to pile up
additional debt. Therefore, the key to the current economic
impasse might lie on the demand side. The government has
tried addressing the issue by spending on infrastructure and by
cutting taxes to boost demand. These are also not without their
associated problems. Any investment in infrastructure will yield
results only after a long lag, and the nature of improved
technology does not allow for the higher employment
generation that one saw a few years ago. Plus, to get an
infrastructure project started is also time-consuming financial
closure in these days of clammy credit markets is a tough call.
Some economists say that the production orientation of the
economy has changed in favor of expensive consumer
products, a sector that might be slow off the blocks in reviving.
In such a situation, reviving demand for wage goods might just
do the trick. Even this hypothesis needs to be tested. The
occasion might present itself soon — with experts forecasting a
better-than-average winter crop, the government should
facilitate hassle-free movement of the harvest to the markets
and consumables to centers where the ensuing agricultural
income can be spent. This may sound simplistic, but sorting the
physical, infrastructural infirmities could be one of the first
achievable steps on the long road to recovery.

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 Limitations of Study

This project may suffer the following limitations:

• The access to information for primary functions of SHCIL is

limited, as the information available on the website is not in
detail and past records are not available.

• The comparative analysis of DP services doesn’t consider

all the schemes, again only one type Demat account is
considered for comparison.

• Limited access to the systems of SHCIL

• The data collection done for knowing the investment

behavior is done from only one city and for short limited
period.

• There may occur error in collection of data.

PIBM, Pune Page 54

 • The current economical crisis would have impact on the
survey.

FINDING & INTERPRETATION

Depository services are been provided by financial

institutions since 1994. Though initially only few organizations
were providing demat services, but now almost all leading
Banking institutions and various Non banking financial institutions
provide demat services.

The major differences between the services offered by

Stock holding Corporation of India Ltd. and the above banks were
difference in Annual maintenance charges and types of accounts
offered, these were due to the nature of organization. As Demat
services are the one of the core activity of SHCIL where as it is
not the core activity of the Banks.

Again Banks offer full integration of Demat account with

bank account, due to this buying and selling process becomes
very convenient and hassle free. Again it has been found that the
AMC charges of some banks is less than SHCIL, but the other
charges like transfer, pledge are more.

Due to full integration of Demat account with Bank

account, the charges can be collected from clients easily by
debiting in their bank account. And it happens that the
customers are not aware or informed of that various charges
collected through their bank accounts.
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 Recommendations & Suggestions

The most vital problem spotted is of ignorance. Investors

should be made aware of the benefits. Nobody will invest until
and unless he is fully convinced. Investors should be made to
realize that ignorance is no longer bliss and what they are
losing by not investing. Mutual funds and Insurance policies
offer a lot of benefit which no other single option could offer.
But most of the people are not even aware of what actually a
mutual fund is and moreover they are still unaware of the
combination of Mutual Fund + Insurance Policy, i.e.
SIP+INSURE PLAN. They only see it as just another investment
option. So the advisors should try to change their mindsets. The
advisors should target for more and more young investors.
Young investors as well as persons at the height of their career
would like to go for advisors due to lack of expertise and time.
The advisors may try to highlight some of the value added
benefits of MFs such as tax benefit, rupee cost averaging, and
systematic transfer plan, rebalancing etc. these benefits are

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not offered by other options single handedly. So these are
enough to drive the investors towards mutual funds. Investors
could also try to increase the spectrum of services offered. The
advisors should try to charge a nominal fee at the beginning.
But if not possible then they could go for offering more services
and benefits at the existing rate. They should also maintain
their decency and follow the code of ethics so that the
investors could trust upon them. Thus the advisors should try to
attract more and more persons and turn them into investors
and finally their clients.

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 Conclusion

Over the past couple of months, fears of a slowdown in the

United States of America have increased. The impact of the
subprime crisis along with a slowdown in mortgages has led to
a significant lowering of growth estimates. Since the United
States dominates the global economy, any slowdown there
would have an impact on most of the global economic
variables.

For India, it could mean a further appreciation in the rupee Vis--

Vis the US dollar and a darkening of business outlook for
sectors dependent on US companies. The overall impact of a
US slowdown on India would, however, be minimal as the
factors driving growth here are more local in nature. Unlike the
rest of Asia, India is a strong domestic demand story, so any
slowing in the US is likely to have a more muted impact on
India. Strong growth in domestic consumption and significant
spending on infrastructure are the two pillars of India’s growth
story. No sector has a dominant influence on earnings growth
and risks to our estimate are limited. Corporate India is also
learning to master the art of efficient capital management,
reduction in costs and delivery of value-added services to
sustain profit margins. Further, interest rates are expected to
be stable primarily due to control over inflation and proactive
measures undertaken by the RBI.

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 BIBLIOGRAPHY

Books:

• Economics by Samuelson
• Marketing Research by B.C.Goel.
• Research Methodology. by A.B.Rao

Magazines:

• Business World
• Business Today
• Dalal Street

Websites:

• google search . com

• search. com

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 • msn search . com
• www.thehindubusiness line.com
• www.shcil.co

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