what is the difference between slow down and recession? – Be and make

Now, every body accepts (Including our PM and FM) that we are entering in to a deep recession and the pain is also severe. There is a lot of difference between the slow down and recession. First we will have slow down it will be in the following stages;
1. The NP growth rate will fall means we will have increase in net profits but not with the same pace as it done in the previous quarters.
2. After passing the first stage (quarter) next we can get some cues that margins are going to shrink like increase raw material/commodities prices, higher inflation, higher interest rates etc., In this stage we are going to see that OPM margins shrinks and some of the bigger companies will post either flat NP numbers or negative NP numbers.
If some policy action taken at this point of time, then the margins will improve and is a classic example for the SLOW DOWN.

But, recession is the next continuing stage to the slow down like it will have further stages like
3. Now despite the policy action, things will not improve. At this point of time we are having some cues that lead to the further weakness like job cuts, demand destruction, production holidays/cuts, falling commodity prices etc., which will drop the top line of the balance sheet. It is the simple example to the RECESSION. (Now we are in this stage)
4. In the recession times stocks will fall madly due to the earnings will fall in a bigger pace than the expected. (Here we will not have any supports, technicals every body just wants the cash and this stage is going to come in the upcoming months/ quarters.)
5. Finally zero interest rate regimes will come and some countries will face deflation also (India still at higher interest rates hence we can expect more and more cuts from RBI). Then the consolidation will take place and will last for more time which gives the chance of the reconstruction of the economies and leaderships. New leaders / economies will emerge from this recession. (This is the improving stage where we can invest in stock specific manner.)


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In the recession times commodity stocks will lead the leadership to the fall. RIL/RPL and metal stocks also belonging to the same group hence they will lead this fall.

Now, RIL is also facing the recession fears and was shut petchem unit for time being and also planning to shut other five divisions in the upcoming quarters (third stage of the slow down) after this consolidation will take place I think it will be after the Q3 results (after Jan 09).

It is not prudent to compare it with the past because our stock markets yet not seen the recession. Till now we just passed through the slowdown periods only.

With thanks
Be and make