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 V Shankar Aiyar |
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AU CONTRAIYAR Bearish Bull or Bullish Bear It must be tough having money and wanting to invest, particularly in the Indian market. I guess every bull and bear (or should I say dog given the doggedness with which the market has stuck in a range) has his day. Take November. In four weeks the Sensex simply waddled between 3788 and 4031 points, triggering hope and bouts of despair. It almost seems that the bulls and the bears have been corralled or fenced. Experts describe this phenomenon as a "range bound" which basically means neither the bears nor the bulls can quite manage the perception well enough for the market to move either ways. Adding to their woes is the fact that there is no stimulus either - internal or external. Internally, the Finance Ministry dilly-dallying between a slowdown and a six per cent growth forecast. Whatever little the ministry has promised in terms of disinvestment -- which could provide a trigger - is bogged down in technical details. The fluctuations of the rupee are only adding to the nervous-ness. External factors - haven't helped either. The market thought the new US president would guide the markets out of the rut instead it has worsened the situation. Nasdaq, the lighthouse markets across the world has in fact added to the troubles by dipping to a 15-month low of 2645. What proves the point best is that although the FIIs -- the guiding beacon of punters, day traders, brokers, operators and of course desi mutual fund managers -invested Rs 932 crore they couldn't quite get the bulls running. So what's happening. Essentially good news is struggling to tear through the overcast of bad news. The bulls seem to be waiting for the season of budgetary promises, which has just about begun on Saturday (when the PM met the industrialists). Some are even selling new theories to push their point that the market has hit the bottom, that bad news has been discounted. One theory for instance is the cement theory, which has inexplicably taken cement stocks up on rumours of a possible take-over of a cement giant by a multinational or an open offer by an Indian entity. The other is that there is a lot of value out there at low prices and that performing stocks (read old economy stocks) would deliver towards the first quarter of 2001. In fact, the Sensex even touched a six-week high of 4050 last week but the momentum was not enough. On Monday, the market was back within the range. The bears on the other hand feel this is just a lull before the storm. They have been aggressively challenging any upward movement raising fundamental issues (the bearish mood at the World Economic Forum meet in Delhi for instance was a big help). Over the last few days they have been aggressively countering the cement story. Their contention: cartel-isation (world over when sales drop, prices are slashed to cover costs and over here they hike prices) will not work in the long run. Besides the story of old economy is not worth the effort as the margins on top line growth are vanishing. In other words, higher sales do not necessarily mean higher profits. The bears have also been privately challenging the government's stance on fundamental issues like fiscal deficit. It is their contention that it is being under-reported and that monetisation is just up ahead. The technical story is that the market is awash with liquidity. Banks are not lending, borrowers are not borrowing, corprorates are not spending, consumers are not buying. What's more liquidity in the form of the Millennium Deposits has also entered the shores. If you are bullish by temperament you would believe that this money would willy nilly enter the market and take the Sensex and some of the "value" stocks to a higher plane. If you are skeptical by nature, you would conclude that much of this money (all $ 5 bn) would find its way into government coffers via government securities. After all they did fund last years' borrowings by keeping the rupee undervalued. So where does John Doe or rather Ram Ghulam stand in such a market. Safety and discretion dictates that he heads for the nearest debt fund and sit tight till such time the waves either bring in or clear the tide. Of course you can be adventurous and jump into the fray. Join the bearish bulls or bullish bears. As they old maxim says, nothing ventured, nothing gained. But then there is another one too. Fools march where…. (V Shankar
Aiyar is Associate Editor, INDIA TODAY. He is based in Mumbai. |
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