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Incoming Recession !!! Data Analysis

 

Timing RECESSION or to see its COMING is a difficult task. Even Economist and Financial analyst, who dedicate their lives to predicting the economy and the market usually do not see it coming. 

 

Though there are Few Exception, Statistical Figure and Indicator  to Predict the Economy Downfall and to make an assumption of its arriving SOON !!!

 

 

 

Economist and Analyst around the globe are making speculation on Global Recession since long, lets look into the Indian Economy and its chance of having a Recession (alongside Global Recession.)

 

Economic recession is a period of general economic decline and is typically accompanied by a drop in the stock market, an increase in unemployment, Decrease in GDP and Inflation rate. 

 

Though the forecast were made, owing to Slow Growth in CHINA, US - CHINA Trade War, Slow growth in Eurozone, Industrial Production Hit in Germany, Brexit, and other. 

 

Starting Feb 2020, Global Economic Problem was worsened due to pandemic effect of Corono Virus and it adverse effect had a  huge impact on the Oil Prices. 

 

if oil prices fall sufficiently, it can cause some oil firms to go out of business and this causes a rise in bad debts. 

 

Indian Share Market has always been predominantly dependent on Global Market behavior, When Dow Futures recorded a Decline, Indian Market Started Tumbling down week after weeks, breaking all the technical Support of last decade and giving lately indication of Bearish Market overall.

 

Indian Stock Market Resulted its Quick Historical Decade Downfall on 9 March 2020, when the Sensex fell by 1,941.67 points, while Nifty-50 broke down by 538 points.

 

Though Market gave the 2 indication for bearish fall, and a week prior, when market was stable from 6th Feb - 20 Feb. and on 25th Feb, when 500 point barrier was recorded. 

 

During this bear market, market sentiment was negative as investors were beginning to move their money out of equities and into fixed-income securities

 

 

 

Recession and Equity Markets Response (indicator)

 

 

So how do equity markets respond to recessions?  Stock prices are influenced by many factors. One key issue is the strength or weakness of the underlying economy. When the economy is strong, consumer and business spending increases and corporate profits improve.

Greater profits support higher stock prices. Conversely, when economic activity slows, spending declines, profits are reduced, and stock prices fall. The stock market typically continues to decline sharply for several months during a recession.  It historically bottoms out approximately six months after the start of a recession and usually starts to rally before the economy picks up. 

All Major Equity Stocks broke their technical bottom and continue to be in downtrend, as the cases of Corona Virus has been in incline and due to Oil Price - War between Russia and Saudi. Reduced Oil Price has still not shown any benefit to India Consumer as such, the government has taken this step of increasing duty to raise some revenue in view a tight fiscal situation. Indian Consumer has still no relief on pricing of petrol and Diesel. 

 

 

Recession and Gross Domestic Product
(Indicator)

 

Gross domestic product (GDPis the single standard indicator used across the globe 

 

to indicate the health of a nation's economy

 

An economic recession is typically defined as a decline in gross domestic product (GDP) for two or more consecutive quarters. GDP is the market value of all goods and services produced within a country in a given period of time. An example of one type of GDP would be the value of all the automobiles produced within India for one year. GDP only takes into account new products that have been manufactured. 

Fitch Ratings in 2019, cut its growth forecast for India to 4.6 per cent for the 2019-20 fiscal from the previous estimation of 5.6 per cent after factoring in significant deceleration in past few quarters due to credit squeeze and deterioration in business and consumer confidence.

 

Recession and Inflation rate
(Indicator)

 

When prices rise for energy, food, commodities, and other goods and services, the entire economy is affected. Rising prices, known as inflation, impact the cost of living, the cost of doing business, borrowing money, mortgages, corporate and government bond yields, and every other facet of the economy.

 

Retail inflation climbed to a six-year high of 7.35 per cent breaching the Reserve Bank of India's upper band of 6 per cent for the first time since the Monetary Policy Committee was created.

 

 

 

Another downside is the risk of stagflation. Many economists have started raising the alarm over India entering stagflationary phase with growth stagnating and inflation creeping up to uncomfortable levels.

For now, as the inflation has breached the upped end of RBI's spectrum, the central bank may not effect a rate cut anytime soon.

 

Recession and Unemployment Rate
(Indicator)

 

High unemployment indicates the economy is operating below full capacity and is inefficient; this will lead to lower output and incomes. The unemployed are also unable to purchase as many goods, so will contribute to lower spending and lower output. A rise in unemployment can cause a negative multiplier effect.

 

Job creation and unemployment are affected by factors such as aggregate demand, global competition, education, automation, and demographics. These factors can affect the number of workers, the duration of unemployment, and wage rates.

 

Unemployment is first and foremost an economic and social problem since it brings about costs for the unemployed as well as the society as a whole. Labor not used for production purposes means permanent output loss and decrease of consumption. ... Hence, unemployment gets qualified as a serious personal and social issue.

 

The unemployment rate in India rose to 7.8 percent in February 2020, the highest since last October, from 7.2 percent in the previous month. In rural areas, the rate increased to 7.4 percent from 6.0 percent in January, while in urban areas, it fell to 8.7 percent from 9.7 percent.

 

 

 

Psychology can also contribute to recession, Fear of Recession can Become a Self -fulfilling prophecy, if its causes people to pull back investing and spending.

 

  negative market sentiment,  as investors are beginning to move their money out of equities and into fixed-income securities.

 

In response , producer might cut Operating Cost, to help weather the expected decline in demand.

 

Many Industrial Sector has cuts down Operating Cost 

Ex : The Central Railways has cancelled as many as 23 trains due to spread of corona virus and non-occupancy of trains.

 

 

that can lead to viscous cycle as cost cuts eventually lower wages, leading to even lower demand. 

 

which might be a possibility. 

 

 

MODERN MARKET care More complex, making today's recession far more difficult to navigate, but each recession provides new data to help, anticipate and respond to future recession more effectively.

 

 

 

 

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