A Bear Run On The Anvil?

Yesterday's steep fall has left several pundits talking about a bear market for the next few months. Most of the participants seem to be hunting for negative reasons to explain the meltdown of the past few days. The rational explanation seems to be that the last rally was a short one in an intermediate bear market.

ASK Me told so

ASK Me's major grouse against the Union budget was that it provided no direction to the economy. In fact, it warned of the potential derailment of growth due to increased tax rates without an attempt at reducing the size of government expenditure. It had further warned that the domestic debt trap was now a distinct possibility with the fiscal deficit and GDP growth almost at par. The report had suggested that an increase in foreign institutional investor limit was meaningless if the markets remain unattractive.

 

All these factors had left ASK Me to conclude two and half months back that the markets would remain bearish for the near future.

...another one

ASK had put a buy on HDFC Bank at Rs 248 citing among things the gains arising out of a suppression of profits. It was of the view that though such measures are frowned upon internationally, it felt that HDFC Bank is adopting a prudent practice in a country like India where the risks for banks are higher and cushions for future problems more appropriate.

FIIs still selling

The nervousness on the bourses have been accentuated by the fact that foreign institutional investors (FIIs) have been net sellers on all the days of the current week. With FII sales figures having a major psychological impact, even the regulator was forced to take a close look at its own figures.

Though the exercise resulted in a reduction in the sales, the damage was already done by then. One market observer put it rather succinctly when he mentioned the "fear of God had been put in the minds of participants".

Mutual party not over

The latest figures suggest that the mutual fund (MF) industry witnessed a net inflow during April. This seems to suggest that the run on certain mutual funds had been unnecessarily played up. However, it does mirror the consolidation of the private sector within the industry, reflected in its high share as a whole.

In fact, the high service and disclosure standards of some of these private sector fund majors have forced even the Big Daddy to take a serious relook at several aspects of its functioning.

The mighty too fall

The bearish undertone of the past few weeks makes one wonder if some of the biggest names in the Indian equity markets are regretting their decisions of the past few weeks.

Among the more prominent deals which come to mind are Jan Fund's aggressive purchases of over 5 crore Reliance shares between the Rs 300 and 350 levels and Mr Big's purchase of 2 million HFCL shares in the Rs 900 to 1000 range.

As mentioned ad nauseam, the bourses can prove even the mightiest wrong on occasions. Some consolation to the retail players is that even the mighty institutions falter at times.

Evading the heat

The heat and sultriness of Mumbai had already forced the small time punter to head for the nearest hill station. And the sustained fall of this week helped One Man's associate to conclude that this was the right time to head for the land of the kangaroo.