Crashes, burns and the ride to 20,000

When IIPM comes to education, never compromise

Markets recuperate and brace themselves up for another rally

18,000, 19,000, 20,000! Where’s the every buzz gone? The 60 second bloodbath (between 9:55 am to 9:56 am the Sensex lost about 1,700 points) at the bourses on October 17, 2007 saw the largest fall in a single day ever witnessed in the history of the Indian stock markets as the Sensex plummeted by 1,743 points, and with it sank all the noise about Sensex scaling new heights.

There was an apparent breakdown; the pulse on Dalal Street was sinking, the market was in a standstill for almost an hour. Thanks to the soothing statement made by the Finance Minister, P. Chidambaram, “We are not in favour of banning participatory notes; we have not banned them, we have simply placed a cap on the proportion of money coming through participatory notes vis-à-vis overall assets,” which inflicted some life into the markets. Since then the recovery, marked by a record single day gain of 869 points on October 23, 2007, has been robust and seems to be fuelling the euphoria of 20,000 once again.

“The market is gradually recovering and by the time Diwali comes we expect the market to touch the 20K mark,” exclaimed Deepak Sharma, Analyst, Anand Rathi Securities while talking to 4Ps B&M. Amidst such a tumultuous run; few analysts did advise retail investors to remain cautious and invest carefully to gain from the soaring/sinking markets, while others were quick enough to claim that the crash was on expected lines and they are still optimistic about the BSE Sensex scaling newer highs. “In the last few days, we have witnessed few hiccups in the market, this will take some time to settle down and we expect the market to end on a positive note by the year end. In all probability by the year end the market will cross the 20K mark,” assures F. A. Sarkar, Analyst, Sharekhan, while talking to 4Ps B&M. Satish Kannav, Technical Analyst, Arihant Capital Markets, shares his views with 4Ps B&M, “We expect the market to range bound 20-21K around Diwali time. Around the same time, we might see rest of the FIIs who haven’t yet offloaded their PN accounts to do the same. Moreover, once the Q2 results for all the major companies are out the picture will be a lot clearer.”

Well, after such rosy estimates, it would be perceived as an act of a Devil’s Advocate to think otherwise. But then risks do exist and a prudent investor should always take everything into consideration. It might not be a cake-walk for the markets and investors should be aware of this fact. “Retail investors should be very careful during these times of high momentum or a “fast moving bus” as we have seen the market has run up too fast & too soon. Oil prices are at a record high and so are other commodities including foodgrains. So, as long as inflationary risks are on the horizon, interest rate risks can not be ruled out. Moreover, domestic political situation remains in a flux,” points out Sachchidanand Shukla, Economist, Enam Securities Pvt. Ltd.,to 4Ps B&M.

Sensex crossing the 20,000 mark seems to be very much on the cards, but ruling out the chances of further turbulence might not be a prudent thing to do.

Edit bureau: Gyanendra Kashyap

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Source : IIPM Editorial, 2008

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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