Global meltdown - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks


Login Failure
(Please do not use this option on a public machine)
  Sign Up | Forgot Password?  

Global meltdown

Jul 27, 2002

With a free fall on the U.S bourses, global equity markets, for the week ended, resemble the remnants of a battleground. And what is even more frightening, investors' are not sure whether the worst is over. With excessive optimism also comes excessive pessimism. The greed-fear cycle seems be playing out. Earlier in this space, we had mentioned that U.S markets could experience further test of strength. While economists' debate over V and W shaped recoveries, markets are more unforgiving looking only at corporate earnings and that too, genuine earnings. U.S corporate earnings were practically wiped out with the downturn gaining momentum in 2001. Corporate America experienced five consecutive quarters of lower earnings. On the other hand, with markets not correcting in line with earnings, valuations continued to remain rich. The same indicates that investors built in assumptions of a quick recovery but with the same premise under question, a re-think on valuations was on the cards. Accentuating doubt was the outbreak of accounting jugglery and corporate malfeasance.

Having said that, the steep drop in U.S markets was most likely to be followed by a relief rally. Volumes on the bourses have almost doubled, which could signal the na´vetÚs' finally exiting equities, as they no longer can bear to see their capital erode. This seems to be a purging process with greed ending in fear and thus completing a market cycle. However, negativity has gained momentum and 'wrongs' of the system are likely to be more in focus. Therefore, bias is likely to be on the downside, as markets try and find their feet. The bottoming process is likely to get support as valuations have corrected to a large extent and earnings for quarter ended June '02 have registered positive growth. Momentum in earnings could continue into 3 and 4Q offering support to the market.

Reflecting the trend globally, domestic equities nose-dived this week. The decline in markets seems more due to traders taking advantage of lack of investor confidence. Absence of large participation and selling by UTI could be leading to an equity overhang. Also, reports of poor monsoons seem to have provided support to traders. Domestic markets seem to be caught in a downward spiral. Investors need to recognize that the domestic economy is on an upswing. The six core sectors, which constitute 27% of the index of industrial production, have reported growth of 5.7% YoY. Corporate results for quarter ended June '02 have come in above expectations. And with the slide, valuations of blue chips have only become more attractive.

Equitymaster requests your view! Post a comment on "Global meltdown". Click here!


More Views on News

This Number Will Give You an Edge Over Other Traders in the Market (Fast Profits Daily)

Sep 30, 2020

In this video, I'll share with you, a crucial number that I track everyday which gives me trading edge.

Is Mirae Asset Ultra Short Duration Fund a Right Solution for Your Short Term Needs? (Outside View)

Sep 30, 2020

PFN explains about the Mirae Asset Ultra Short Duration Fund.

India's Drone Revolution is a 4x Profit Opportunity (Profit Hunter)

Sep 30, 2020

My research on India's leading defence companies brought me to one major player in drone manufacturing.

The Gold and Silver Bull Market is Not Over (Fast Profits Daily)

Sep 29, 2020

The last few days have been nerve-racking for bullion traders. Stay calm. The bull market still has a long way to go.

Earned Short Term Capital Gains on Shares? Here's What You Need to Know While Filing ITR (Outside View)

Sep 29, 2020

PersonalFN explains CBDT's clarification regarding scrip wise disclosure in ITR in case of short term capital gain.

More Views on News

Most Popular

Why We Picked This Small-cap Stock for Our Hidden Treasure Subscribers (Profit Hunter)

Sep 17, 2020

This leading household brand will profit big time in a post covid world.

My Top Stock to Buy in this Market Selloff (Profit Hunter)

Sep 22, 2020

The recent correction offers a great opportunity to buy this high conviction smallcap stock.

Can the Nifty Fall to 10,200? (Fast Profits Daily)

Sep 24, 2020

The Nifty has reached an important support level today. If it breaks then we could see further downside.

What Do the Charts Say About Buying Smallcaps Now? (Fast Profits Daily)

Sep 18, 2020

Everyone seems to be excited about buying smallcaps now...but is it the right thing to do? What do the charts tell us? Find out in this video...


Covid-19 Proof
Multibagger Stocks

Covid19 Proof Multibaggers
Get this special report, authored by Equitymaster's top analysts now!
We will never sell or rent your email id.
Please read our Terms


Sep 30, 2020 (Close)