effect of recession on stock market

8/14/2019 Effect of Recession on Stock Market

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THE PROJECT IS PRESENTED BY

MAHASWETA G. ROLL NO. 10

SWAPNALI GHADGE ROLLNO. 11

SMITA GUJAR ROLL NO. 12

PRANEELA PATIL ROLL NO. 31

DIPIKA PUJARI ROLL NO. 32

VIKAS RAJPUT ROLL NO. 33


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The economy is a cycle. First it starts and it takes growth stage, then it takes boom

stage and then falls down which is recession. Another indicator of recession is a decreasing gross national

product of a nation, which is observed over two quarters. To be a successful investor you need two main things - the

knowledge and the right trading platform. Economic activity usually passes through four phases

recession, depression, recovery and boom. In macroeconomics, a recession is a decline in a country's

gross domestic product (GDP), or negative real economicgrowth, for two or more successive quarters of a year.


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A stock market is a market for the trading of companystock, and derivatives of same; both of these aresecurities listed on a stock exchange as well as thoseonly traded privately.

Stockbrokers and individuals can invest in the market. Stock markets refer to a market place where investors

can buy and sell stocks. The price at which each buyingand selling transaction takes is determined by themarket forces (i.e. demand and supply for a particularstock).

The stock market is one of the most important sourcesfor companies to raise money.

The economy and the stock market are closely related.


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The stock market starts to fall before a recession starts. It starts to recover in the late stages of a recession before the

recession has reached its bottom. Stock prices almost always start to fall a few months before

the recession has formally started as signals of animpending slowdown and possible recession are alreadymounting even before a recession is formally triggered.

The fall in the stock market level in the recession was33.88% in the 1974-75 recession, 10.6% in the 1980recession, 18.2% in the 1981-82 recession, 14.6% in the

1990 recession, 10.3% in the 2001 recession. Once a recession has triggered a severe bear market, at some

point before the bottom of the recession the stock marketdoes start to recover.


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Black Monday saw bloodbath on Dalal Street as the Indianstock markets crashed by over 1430 points in afternoon trade.

Why did this huge fall happen? There is a change in the global investment climate.

One of the primary triggers is the huge fear of the UnitedStates' economy going into a recession with foreigninstitutional investors trying to reallocate their funds fromrisky emerging markets to stable developed markets.

How long will the markets keep falling? Analysts expect the markets to continue to be choppy for a

while till global liquidity and commodity prices settle in. With the markets falling, a technical correction in the

derivatives segment has perpetrated a larger fall.


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It really depends on your situation and what type of investoryou are.

First, remember that a bear market does not mean there areno ways to make money. Some investors take advantage of

falling markets by short selling stocks. Essentially, an investor who sells short profits when a stock

declines in value.

Problem is, this technique has many unique pitfalls and

should be used only by more experienced investors. Another breed of investor uses recession much like a sale at

the local department store.


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The capital market in India may continue to springmany a surprise in 2009, but smart investors have

begun to increase their exposure to a few selectivesectors which may outsmart others during this year.

Analysts largely accept the view that there is not muchdownside to October lows for the Indian equity market. But none is sure how long this bear phase will continue,

though everyone is convinced that stocks will begin toshine six months ahead of the recovery of the realeconomy.

Yes, a few sectors or at times, a few individual stockswill give the leadership to the market which has now

become largely range-bound.

effect of recession on stock market

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