Which Indian sectors will most affect due to U.S Recession

Query: If the U.S. goes into a recession or if the world economies slows down drastically, which are the sectors that will be most affected in our markets? Tino Thomos

Thebullishtrends: Very good question Mr.Thomas. Asia and mostly India will hit due to likely U.S recession, a significant correction will be happend in India markets(ofcourse now it is happening). India may be little bit less export-dominated compared with other typical Asian economies. When you have seen other Asian countries like China, the share of exports in China's GDP is as high as 36.6 per cent. Exports to the US alone are as high as 21 per cent. Same for Japan, the share of exports to US is 22.5 per cent. For Korea, the share of exports to GDP is 36.7 per cent, and US share at 13.3 per cent. U.S recession will hardly hit Indian markets. Tighter credit standards and higher credit costs will slows down the U.S economy.

As per the lastest reports by Goldman Sachs it was lowered India's GDP growth forecast for the year 2009 to 7.8 pct from 8 pct as it sees a slowdown in external demand on renewed expectations that the US will fall into a recession this year and trigger a decline in global demand. It was published in the in a news thomson financial news.

Presisting economic recession may leads to deferred consumption, can put a further recession a self-fufilling prophecy and incase of U.S the world's largetst spender can stop buying the world's(imported) products of everything like cars to clothes and computers etc. Ofcourse India export's were badly affected due appreciation of the rupee against dollor rate.

U.S recession may affect sectors like I.T it would be happen due to low demand for the companies in U.S and the IT sector revenues growth have seen falling to 22 percent from 39 percent as most of the companies revenues concentrated in the U.S and recession will affected to Indian I.T Sector, and the sectors like Auto/Banking/Textiles and apparel,Gems and Jewellery will badly affected. But at the same time sectors like Capital Goods Steel sectors may do well.

But when U.S. goes into recession the following things may happen:

*If the US Federal Reserve cuts rates while the Reserve Bank of India (RBI) maintains or increases them, the rupee will strengthen further against the dollar - perhaps crossing 43!

*Given the high degree of correlation between markets worldwide, Indian equities will likely follow US equities downward, but the fall might be cushioned by a better domestic economy.

*Gold is unlikely to do any better during a recession, until inflation continues to rise even as economic growth stagnates (stagflation).

*The IT sector will suffer from slower growth, but be compensated by even more jobs getting outsourced to India as companies cut costs in the US.

*Commodities will get hurt as the various booms (residential & commercial real estate, infrastructure, etc.) peak out - thought that doesnt seem to be the case yet.

* India has to concentrate on African markets there are several opportunities are there for Indian Pharma companies in the African region, it could get more benefits by expanding their business operations. ( Praveen-Equity Desk)