Monday, November 24, 2008

This Bear Market may last longer than we imagine

The bear market started in January 2008 when the Nifty made its all time high. We have seen ten months of a down move, the bear is now 10 months old. Is this enough ?
With some regret, I have to say that the bear market is likely to last longer than we imagine. Here are many reasons for this contention.

First, History. The last two bear markets started in 1992 and 2000. The 1992 bear market bottomed out in 1993 while the 2000 bear market botomed out in 2001. After making the bear market lows, both markets spent a lot of time base building.

Second, Bases. The 1992 bear market saw almost all sectors participate in the 'harshad mehta' rally. The resulting bear market was prolonged bcause all sectors were hurt. The market took a long time to build bases before reaching out to new highs. The 2000 bear market was mainly a Tech crash. The so called 'old economy' stocks had not participated in the rally. They were quitely building strong bases even during the IT boom. After the market crash, the 'old economy' socks took up leadership quickly as they were already in the process of base building. The bear market lasted for three years with an unprecedented bull market starting in 2003.

Where are we now ? The 2003 - 2008 bull market was similar to the 1992 bull market where all sectors of the stock market participated. Now, there is no leadership left. All of the sectors must go through the base building process. This will take its own time.

What is the chart for the Nifty looking like ? It shows a straight line decline. Where is the base ? This market will take its own time to revive. Meanwhile, we do not know if the market has bottomed out. Thus, there is a lot of pain probably left. Take care.


chetan Joshi said...

Yes sir,
I fully agree with you, sir tell me how far the packges will help the market to fall?

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