• OUTLOOK ARENA
  • VIEWS ON NEWS
  • APRIL 2, 2001

Will history repeat itself?

The first half of the previous week did raise hopes of a welcome change to the steady slide, which was being witnessed on the bourses. However, adverse proceedings on the international and domestic markets led to the domestic indices slipping back into the red. This is the seventh consecutive weekly decline on the BSE and NSE. A repeat after eight and a half years.

Since the historic budget of Mr. Manmohan Singh in 1992, the then finance minister, the markets have only fallen twice for seven consecutive weeks. No price for guessing when was the first time. To refresh memory, the only other time the markets saw a seven weeks of continuous decline was in 1992 -- year of Harshad Mehta scam -- from October 1, 1992 to November 20, 1992.

Falling back on past BSE Sensex data, post liberalization, to try and determine how the markets could react brought out some interesting points. Never have the markets fallen for eight consecutive weeks and only once since 1992 have they declined for nine straight weeks from 17th November '94 to 27th January '95. Therefore, having fallen for seven straight weeks (February 16, 2001 - March 30, 2001) will the coming week halt the bear run?

Consecutive drops
1-week49
2-weeks27
3-weeks12
4-weeks13
5-weeks5
6-weeks0
7-weeks2
8-weeks0
9-weeks1
10-weeks0
11-weeks0
Consecutive gains
1-week48
2-weeks25
3-weeks19
4-weeks8
5-weeks4
6-weeks3
7-weeks0
8-weeks0
9-weeks0
10-weeks0
11-weeks1

There have been 239 weeks of decline as against 236 weeks of gains.

If the past records are any indication, it is more likely that the markets will fall nine straight weeks than eight. However, having fallen seven consecutive weeks already, the chances of the markets falling further are 33%. The probability for the markets to fall seven or more straight weeks is a minute 0.6%.

Looking at it from another angle. The week (April 30, 1992) Harshad Mehta was arrested the markets closed 578.3 points lower or 13%. As the scam was unraveled the decline continued for 3 straight weeks wiping off 1072.5 points of the Sensex or 24% of the market wealth. Friday, May 14, 1992, the day the bank accounts of the infamous Growmore Financial Services were frozen the markets closed the week with a 5.9% (229.7 points) drop. More importantly, the following week the markets dropped 7.2% or 263.5 points despite the weekend break in between.

Nevertheless, having put forward the data, it is a plus point that the arrest of Mr. Ketan Parekh was after market hours on Friday. If this was a calculated move one has to praise the thinking of the concerned authorities. The weekend break will help settle some frayed nerves and may have prevented a panic sell situation.

Therefore, the markets could be expected to exhibit more rational behaviour. Although the undertone remains weak, as revelations of the scam come forth. Also, fortunes on the NASDAQ will bear an impact. K-10 darlings though will continue to face a tough time.

Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (Research Analyst) bearing Registration No. INH000000537 (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA, Canada or the European Union countries, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

Equitymaster Agora Research Private Limited (Research Analyst)
103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407