Do it yourself

“Bear market” is perhaps one of the most prominent phrases being used on social media, in the context of global stock markets. Several of the major global indices are down over 10% from their recent high levels. Japan (Nikkei 225 -17%), US Tech (NASDAQ -12%), France (CAC40 -14%), China/Hong Kong (Hang Seng -14%), and South Korea (KOSPI -11%) are some of the most talked about markets on social media. The Indian indices have not fallen materially from their recent highs. The benchmark Nifty is barely down three odd percent from the highs it recorded last week. Obviously, in India, the household investors are not yet worrying about the possibilities of a bear market, as for them the sky is still bright blue with few scattered cumulus clouds. Nonetheless, this phrase is gaining frequency in the personal discussions. From my various interactions with the market participants, I gather that many of them may have a different, and often misplaced, understanding of the concept of bear market...

The benchmark Nifty 50 crossed the 16000 mark for the first time this week. Predictably, the moment was celebrated by media and “market influencers” with gaiety and fervor that is usually shown at Nifty50 crossing every subsequent thousand (K) mark. The fact that from 10k to 11k - it is a 10% rise; whereas from 15K to 16K it is just 6.67% rise, is usually disregarded in celebrations and recounting of the journey from one ‘K’ mark to the next “K’ mark. It is also mostly ignored that Nifty, like any other statistical number, is meaningless in isolation. It must be juxtaposed with some “other” statistical number to derive any inference. The selection of this “other” number, however, usually depends upon what the data user wants to conclude. If the user wants to feel good about the current Nifty number, a comparison with an inferior set of statistics is preferred (e.g., Nifty has performed better than gold over past decade); whereas if the user wants to show the current Nifty number in a...

 The benchmark indices are scaling new highs every week for past seven weeks as least. The sharp recovery in markets, from deep correction in March, must have surprised most market participants. Many who panicked and sold off in summer are wondering whether it’s time to “Buy” again. Many who remained invested are wondering whether it’s time to ‘Sell”. The broader question therefore seems to be, whether we are in a new bull market since April 2020, and the stock prices have a long way to travel north before any meaningful correction sets in; or it is a bear market rally that is normalizing the steep fall in March 2020 in the wake of total lockdown announced post outbreak of pandemic. The last bull market started from August 2013 and lasted 5yrs till August 2018. In case we believe that it is new bull market that would mean that the bear market that started in August 2018 ended with panic bottom of March 2020. However, if we believe that March 2020 panic fall was an aberration ...

The brokerage firm, Sanford C. Bernstein in a recent report highlighted some noteworthy points. The firm evaluated whether the recent sharp fall in economic growth would mark the end of the slow growth cycle triggered by the global financial crisis a decade ago; and beginning of a sustained high growth cycle leading to a multiyear bull market in Indian equities. The issue is relevant from many points. But as an investor, I find it more pertinent in view of the current market sentiment. The huge divergence between the macroeconomic data and equity markets has disturbed even seasoned investors. The common investors on the other hand are swinging wildly between the opposite polls of greed and fear. Each one percent rise in equity prices ignites the greed and slight fall in prices imposes the fear. Obviously, swaying by these extreme emotions, not many investors/traders are able to maintain their composure and losing money. The rising volatility in the prices of precious metals is maki...

The past 5 weeks have been most horrific period for investors in financial since the five week period in September-October 2008. A colossal destruction of investors' wealth has already taken place. There is an argument that this destruction is only a notional mark to market (MTM) loss if the investors' continue to hold the securities, as the prices will certainly recover as soon as the COVID-19 is contained; may be in 3-6 months. The proponents of this view are cautioning the investors that selling the securities at this point in time will convert the temporary MTM losses into permanent erosion in wealth. Some readers have asked about my view on this argument. I have already expressed my views on this issue multiple times in past few months. Nonetheless, I do not mind a reiteration. I believe that the market cycle in India that started from 2013 has definitely ended. Historically, the sectors and stocks that lead a particular market cycle, are not found...

In past seven weeks, the Indian equity markets have corrected sharply. The benchmark Nifty50 index has fallen almost 9% in this period. The gauge of fear (volatility index) has risen over 60% in this period of seven weeks. This sharp correction in values, when everything appeared to be working normally for Indian equities has triggered an intense debate about the sustainability of present levels of equity prices. Some prominent analysts and investors have highlighted that the 11 year old bull phase in global equities that started post Lehman collapse and commencement of easy monetary policies may just about to be over. The disruptions created by spread of coronavirus (COVID-19) may have opened many fault lines in the global financial system, hitherto camouflaged by the persistence monetary stimulus by central bankers. Many technical analysts and chartists also fear an extended winter for Indian equities this time. Since I have recently increased my allocation to ...