The world markets probably started with one of their worst ever week opening this week with a terrible news of Lehman bankruptcy. It could not have been a worser news than this at this current market turmoil.
And as expected indices across the world reacted plunging to their lows this year. Lehman bankruptcy came with one more surprise yet a bloodier one, Merill Lynch sold out to Bank of America. It is now certain that the US financial industry is seeing its crack because of one of the worst ever mortgage crisis it has ever seen.
And the story does not end here. AIG seeks more around $40B bridge loan from Government to prevent it from failing. It seems WaMu and Wachovia are also next in line.
People were confident that FED will bailout LB as it did previously this year for Bear Stearns, Fannie and Freddie. There were voices when FED bailed out these companies criticizing that tax payers' money should not be used to bail out failed companies.
Those voices seems to be smiling now with LB filing for bankruptcy. This resulted in bleeding of not only US financial system, but also across the world. The disaster will be known only in a day or two when those get affected will be out atleast a day later. It is believed that some of the big European banks will also follow suit.
The sub-prime mortgage crisis started last year seems to be seeing its real victims now. Some more pain may be left in the market before it reaches its peak of pain.
The world is watching.
But at the other end of the globe, in India, IT companies and IT employees are eagerly watching these developments. More than 30% of the revenue of top Indian IT firms are from these US financial giants.
Pain for them means equally pain for Indian IT industry also. Already affected with a slowdown concern across the globe and affected by Rupee appreciation last year, Indian IT firms are in for one more trouble.
Affected by the sudden appreciation of Rupee last year to 39 levels, Indian IT firms started hedging in Re Vs $. This very hedging backfired as Rupee surprisingly depreciated to 46 this week and there is no sign of it turning back its movement.
Affected by all these turmoils, Indian IT bellwethers started giving pink slips, surprisingly, in 1000s. It is certain that global financial turmoil will continue and slowdown persists for some more time, we can expect more pink slips from Indian IT industry.
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