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Bulls 'n' bears slug it out

Dec 15, 2001

After rising higher for 11 consecutive weeks the domestic markets finally stopped for a breather. A similar trend could be seen on the bourses abroad. Investors, globally, seem to have pulled out of equities, as theories of the run getting ahead of itself seemed to be gaining ground. This was the second time since 1992 that the markets had a continuous run for 11 consecutive weeks. Incidently, the earlier run was in the first half of 1998, a few months prior to the start of the 18-month long bull charge running into February 2000. With a many investors espousing bottoming out of markets are we to fasten seat belts for a similar intoxicating ride? Currently, it seems, participants are spilt in the centre between the market running ahead of fundamentals school and V-shaped economic recovery supporters. Also, one might question, considering the 18 months of pain, do investors want to take that ride? and if not, will there be a ride at all?

Many investors are looking towards the U.S for signals of an economic turnaround. The U.S economy is largely consumer driven and reports on that front do raise doubts on a fully invested theory. The U.S consumer is indebted. U.S credit card and mortgage delinquencies have seen a rise, corporate lay-offs continue and though markets are up they are still below their peaks. On the other hand, the Indian economy is more government/private investment driven. There are fears that private investment has slowed down with the onslaught of global competition. But Government spending and better agricultural year could lead to higher economic growth.

Having run up in anticipation of an economic turnaround, investors are likely to wait for data to corroborate their hunch. Consequently, markets ahead, could be less exciting compared to the past 11 weeks. But, having factored in a turnaround, it runs the risk of having made a wrong call.


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