Tentacles Of Terror

When the twin towers of the World Trade Center (WTC) in New York were decimated by an act of terror on 11th September, the already faltering confidence level of the global economy in general, and the IT industry in particular, took a major beating. 

The human loss was incalculable. The tragedy was indescribable. In fact, looking at the developments consequent to the WTC crash, one would say that the confidence of the global economy came to be buried under the debris of the WTC, at least in the short term. 

As the WTC debris are picked up in bits and pieces, the world economy too will have to pick itself up in bits and pieces because the stock markets which act as the pulse of the economic sentiment, have shown that the tentacles of terror can chase away the bulls from the trading arena in an overwhelming fashion.

This was evident when the tech-heavy Nasdaq lost 116 points, the second sharpest fall ever on the first day of the resumption of trading on 17th September after the exchange was shut down for a week. The Dow Jones Industrial Average witnessed a historic fall of 684 points on the New York Stock Exchange on the same day.

The prices of leading IT stocks were hammered beyond recognition. Only IBM and Apple managed to scrape through with a three percent fall. Investors took it for granted that an act of terror had transformed the so-called slowdown in the market into a recession. 

When the pulse of the American economy was at standstill for a week, the stock exchanges elsewhere in the world had already anticipated economic devastation in their countries. The result was that stock markets reacted sharply.

Indian stock exchanges were no exception. At the Bombay Stock Exchange investors lost an unbelievable Rs 78,000 crore in one week with sensex reaching new depths and closing at an eight-year low of 2681 on 17th September. Clearly, investors had perceived that a combination of terror and recession was no good for the health of the economy. 

There isn't any more doubt that the recession has sunk in. Look at declining sale of semiconductors which is expected to reach 31 percent this year according to Merrill Lynch. Earlier, analysts had forecast that the recovery could begin in the last quarter of 2001. But that was not to be. With the latest developments in the US, the down trend in semiconductor sales could continue till at least the middle of next year.

Even industrial giants like General Electric and Ford have warned that their sales would take a beating in the coming quarters. When enterprises like these send out warnings, software exporters from India have to sit up and watch because it would be long before new orders are placed with them.

Thus, the scenario is grim for every IT player. But this will pass. Every IT player has to work with the optimism that better days are ahead which is undeniable. What is critical is to sustain the next four to six quarters making service and support the cornerstone of one's business.

sylvesterl@cmil.com