The clock turns full circle: where do we go from here?

There are a lot of differences in the situation prevailing at the beginning of January 2008 and the end of June 2008.

In January the stock markets were in euphoria, breaking new records everday on the upside. Liquidity was driving the markets mad despite the unearthing of the US subprime crises. Analysts and Brokerages were predicting sensex levels of 25000 and above in the short term. Rupee was holding strong against the dollar and the predictions were af rupee appreciating to Rs36/ dollar by the end of 2008. Everyone was bullish on the growth prospects of Indian economy. The index of Market optimism was more than 90%, that means 90 out of 100 people beleived in pumping money into Indian equity. Even then there were 10% of the people who beleived that fundamentals of the markets were not supporting the overall optimism, so they were selling in the markets. They may have been branded as fools, because they may seem to have lost the oppotunity in the short term. These minority stakeholders must be a smiling lot today. Things changed dramatically within a span of a few days and the markets came crashing down by over 20%.

Today, in June 2008 the situation is reverse. Everybody is talking about the equity markets with a negative bias. The market continues to fall despite the growth prospects of Indian markets remain fairly optimistic. The market is flooded with negative news. The rupee is being predicted to depreciate to Rs45/dollar by the end of the year. The index of Market optimism is down to 10%, that is 90% of the stakeholders are running away from the markets, even at the cost of booking huge losses. It's again those 10% of the people who beleive that the valuations of the market have become exteremely attractive, and they are buying selectively inti 'Blue Chips'. In the short run the market may go down further, making them look foolish, but these will be the paople who will have the last laugh 6 months from now.

However, there is one similarity in the situation prevailing in the beginning of January 2008 and now. Both the situations point to a trend reversal. While January 2008 siganalled the end of the bull phase, June 2008 is likely pointing towards the end of the bear phase in Indian markets. Just one good news can change the fortunes of the markets. It could be the decline in oil prices to the level of US$ 100/barel. It may seem wishful thinking, but it is very likely to happen with the liquidity tightening measues initiated by Asian Central banks.

Its time to decide whether you belong to the 10% tribe, or will like to go with the majority opinion. Remember 'Fortune favours the Brave'.