S&P Downgrades Indian Economy

The latest Business Today -TeamLease Employment Outlook Survey (July-September 2008 quarter) shows that the Business Confidence Index is down five index points, while the Employment Outlook Index has risen marginally by one index point. This means that the lull in hiring activity is showing signs of ending, but it's still lazy days for job growth. The employment growth prospects for the IT, ITES, infrastructure, and manufacturing & engineering sectors are buoyant while financial services and telecom are projected to witness a reverse swing in their hiring activities.

This is a matter of concern for an economy that is already struggling with inflation at 12% and commodity prices still rising. The employment index might particularly prove to have a negative impact on market sentiments at a time when Sensex is trying to pull back.

Moody’s has put a Neutral position on the Indian economy for current investments and India had already be downgraded as the least preferred amongst BRIC nations by Standard and Poor a week back. This is bad news for India, at least for the time being. The short term outlook for brokerages and banks is bearish. Sensex will test 15500 levels and if it breaks those levels with enough volumes, then it may finally be the Bulls’ chance to stampede.