After crossing 20000 levels, Sensex is hovering around 14000 levels in a short span of about 2 months; one of the steepest falls seen in the history. It is touted as one of the worst financial crisis after independence in the history of share markets.

The root cause of this fall is said to be the sub-prime crisis in US, which has triggered the fall. This crisis has seen many banks failing since the 1930s. The crisis is being attributed to bad lending, bundling of mortgages leading to financial crises.

The Fed rate cut that immediately boosts the sentiment in stock exchanges across the globe basically increases the liquidity in the market that makes borrowing loans much cheaper by the bank. Federal Reserve in the United States lends cash to solvent banks to preempt the panic in the market but it would ultimately deprive the economy of credit.

This rate cut however fails to hit the root of the financial crisis and in all possibility is a knee jerk reaction to the whole issue and not address the real concerns use of the problem. Unless these issues are addressed, it would be like sending good money after the bad and investor confidence would collapse. With this, the entire, process of extending credit for the economy and of trading for stocks, bonds, foreign exchange may also collapse.

In the meanwhile, the real economy of production and jobs is weakening. Furniture, textile and other small consumer industries have virtually been wiped off across the Europe and in most other parts of globe by few south eastern countries which have no regard for labor laws. These countries make their subjects work in sub-human condition with scant regard for the human values. Even telecom hardware industry manufacturing has been wiped off across the globe and has virtually shrunk to China. The disturbing factor is that the industry is not moving to China for its better productivity but because of exploitation of manpower that is forbidden in most developed countries in the world.

Similarly food processing and consumer goods industries are on the verge of collapse. That leaves only some natural resources based industries as petrochemicals and services sector industry for the rest of the world. These industries too cannot sustain themselves as these are consumption driven and unless there is growth elsewhere, consumption in these sectors too can not sustain.

If stocks or say economy in general is to get on upwards path, real solution is in ensuring that there is a global harmony in making the industry flourishes across the globe and not in certain pockets. If a nation, whether it is US or India, continually witnesses shift of jobs to other nations, its stock exchanges would continue to see the blood bath.