Effects of the Financial Crisis on the IT industry

The credit crunch which has now turned in to a full blown recession in the United States is going to have a serious consequences on the Indian IT industry. You can already see some of the changes through the industry

1. Staggered joining dates for freshers. Freshers who normally join IT companies in the July - September period after graduation have had their joining dates pushed back to Feb and March, which might get pushed further back.

2. Reduction of the variable components in Salaries. Most companies have a variable component in the Employee salaries that is dependent on Company performance and on individual targets for higher level employees. With a reduction in growth of companies, few would be able to achieve growth targets hence Employees are going to take away a small pay check over the next two-three quarters.

3. Reduction in bench strength. With very few new projects in the offering, Companies have started to reduce the bench strength.

4. Reduction in Employee Perks like vacation air tickets being provided for onsite employees have been canceled now.

What effects have you seen in your company ??

ICICI Money Multiplier

Create Auto Linked Fixed deposits
If you have more than  Rs 15,000  in your savings account in ICICI, you should better make use of the Money Multiplier facility in ICICI. ICICI allows you to invest the extra money in Fixed Deposits that can be closed prematurely. In a Resident Savings Account, ICICI pays you a interest rate of 3.5 percent, with a fixed deposit of one year you can make as much as 9- 10 percent. Interest rates for different durations can be found at the following link.

http://www.icicibank.com/pfsuser/interestrates/interestrates.htm

What happens if you break the Deposits prematurely
As soon as you balance goes below 10,000 , your Fixed deposits are broken in reverse order of their creation, the one that was created last is broken first. You can easily earn more than a couple of percent more in interest rates. ICICI official guidelines for the money multiplier features can be found at the following link.

http://www.icicibank.com/pfsuser/icicibank/depositproducts/quantumoptima/features.htm

One bad thing about this is it says you cannot avail this facility if your account is linked to a ICICIDirect demat account. I am trying to figure out a way to use this along with your ICICIDirect account. Will update the post once I find out.

Technorati Tags: ICICI

Spotting the next Orchid chemicals ...

Orchid chemicals is stock that had fallen from its peak of 300 to a low of 110 about a fortnight ago. But the stock has seen amazing recovery and gained something like 23 percent  on Monday and has reached a price of 223. If you had invested in this stock 15 days earlier you could have made a profit of hundred percent.

Orchid chemicals lost a whopping 44 percent of its value on the day of when Bear Sterns was sold to JP Morgan for $2 a share. Bear Sterns sold nearly all its assets in the Indian market and sold its stake in Orchid chemicals completely and this lead to margins calls for two firms Indiabulls and Religare securities. A nice article here on what happened during that day.

The company is still based on solid fundamentals and had reported  91%increase in the net profit in Q3 December 2007 over Q3 December 2006. It reported a sales growth of nearly 40% in the same period. Stakes sold in the market by Bear Sterns have been picked up by other Investment banks like Credit Suisse and with Ranbaxy picking up a 9.4 percent stake in the company, Its price has sky rocketed with a 23 percent increase yesterday. And as I am writing this down,  its already up another ten percent in today's trading.

Its much easier to write about such recoveries once they have happened, the trick lies in spotting such stocks that can have a V shaped recovery. So what do you think would be the next Orchid chemicals ???

Technorati Tags: Orchid Chemicals,India,Stocks

US Home Loans vs. Indian Home Loans

Swaminathan S Anklesaria Aiyar in The Sunday Times has written a great article by reasoning why a Subprime mess is not likely to take place in India. Is this definitely an eye opener.

Read the article here.

Also, I feel he’s a great writer and some of his earlier articles are also gems. So please find the list of other articles here.

Here’s a small excerpt.

A housing boom-and-bust has engulfed the US financial sector in crisis. India, too, has experienced a runaway real estate boom, which in a few areas is going bust. The share prices of real estate companies have crashed. Yet, India has no mortgage crisis or financial sector crisis.

Why not? Mainly because of the huge amount of black money in Indian real estate. This has saved the Indian financial sector in unexpected ways. Traditionally, US mortgage lenders checked the creditworthiness of borrowers, and then made the borrower pay at least 20% of the house value, loaning the remaining 80%. So, even if the price of the house dipped, it would still be higher than the bank's loan, and the borrower had an incentive to repay it.

Also if I may add, buying a house in India involves a lot of sentimental factors associated with it. The strong family ties, concept of a joint family or living with your parents also serve as a deterrent to just switching houses or walking away from one. While the amount of black (illegal) money in circulation in India is certainly not advocated it’s an interesting outlook into how the home loan market in India works.

On why, if the US sneezes

… India can catch a cold. The phrase that if US sneezes India will catch a cold is very popular in the Indian media these days. It’s very true in the present global economy where businesses are no longer isolated from each other or from other parts of the world. This being evident by the hit taken by ICICI Bank. Especially true in the case of our services sector where now it has become one of the major contributors to India’s GDP.

The Oracle of Omaha, Mr. Warren Buffet has spoken. He says the US with a $9.5 trillion economy is in recession, even though technically it may not be, since it has not recorded two straight quarters of negative growth. This has to be taken seriously coming from a man whose organization’s per share book value has compounded 21% annually and who recently overtook Bill Gates to become the richest man in the World.

US GDP growth in the last quarter (Oct ’07 – Dec ‘07) has risen by just 0.6% and the IMF forecasts US GDP to grow by 1.9% in 2008. China on the other hand is looking at cosmetic ways of cooling down GDP growth. One of the biggest trading partners of the US is China and while in 2007 US exported goods worth $65.2 billion it imported goods worth a staggering $321.5 billion from China. That accounts for 40% of the exports from China. China has recorded double-digit growth in exports in almost every major sector to the US. If US growth is indeed slow; trade from both the countries India and China with the US will slow down. China would not get affected much as it’s anyway looking to cool down it’s booming economy but if it decides and grabs this opportunity to provide more value than India to the US it’s a cause for worry. China can very well force its muscle to get a bigger pie and India better watch its step.

One of the star performing sectors for India is the services sector, read IT and IteS, which is a big chunk. Already the local players in China are giving a tough competition for Indian players who want to establish a presence in China. Not that the Chinese aren’t experts at fields other than the core sectors. China’s search engine giant Baidu is giving tough competition to even the Internet behemoth Google.

While the Chinese growth has largely been government led, Indian organizations will have to find their own feet and keep going without the government’s help while they are busy playing their bureaucratic games.

As the Chinese say - “May you live in interesting times”.