Do it yourself

  The markets have been in a punishing mood for the past couple of weeks. Especially after the “path breaking budget”, the markets seem to be adjusting to the RBI’s rather tepid growth forecast for 2HFY23. Obviously, the RBI does not share the enthusiasm of the government over public sector capex triggering a virtuous cycle of growth led by private sector investment. The narrative of geopolitics (Russia-Ukraine conflict) and Fed tightening scaring the markets does not sound credible. Russia and Ukraine have been at war for three decades, since the dismantling of the USSR. Eight year ago, in 2014 Russia annexed one of the larger provinces of Ukraine (Crimea) and markets have not cared much about that, just like it has learned to live with the perennial conflicts between Israel and Philistine; US and Iran, South Korea and North Korea, India and Pakistan; etc. The US Federal Reserve started winding up its asset buying program (QE) last year and announced its intent to hike policy rate...

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 few months, a large number of prominent market experts have publically stated that the present phase of market correction is perhaps the worst they have seen in their life time. Many of them have recently indicated that the Indian equity prices may be close to their bottom and a recovery is imminent. In view of these assertions by the prominent market personalities, I find it pertinent to examine, whether equity prices are close to hitting the rock (if not hit already). For me, the most successful, though intuitive indicator of market bottoming is the dominance of "fear" over "greed". The phenomenon is usually reflected by a combination of the following three factors: (a)    Sharp underperformance of broader markets as compared to the benchmark indices, for the current market cycle. (b)    Materially negative market breadth for the current market cycle, indicating capitulation of large number of non institutional investors. ...