ITS NOT A BEAR!!!

The markets fell off the floors today, with the mood of despondency and confusion taking over.

There are now headlines, going over-the-top, proclaiming that the bears have taken over the trading floors. Now, that is exaggeration to the hilt. Somehow, the media does not want to ever take a more sober, balanced look at things – its either extreme optimism or extreme pessimism.

Suddenly today, with nothing much changing on the ground, punters claimed that worry over the Delta Covid variant spooked the global and the domestic traders, leading to profit booking. But even in this so-called “anxiety” the IT sector remained in the green as the TCS numbers are awaited. So, even the worry is pretty selective. How is that a bear market at all?

Just for our knowledge, so that we know what the others don’t –

CHARACTERISTICS OF BEAR MARKETS

• Falls short of its target – both in terms of price and time.
• Ranges and volatility decreases.
• Lower volumes and falling open interest.
• But when new lows are hit, volumes as well as open interest surges on panic selling.
• Often last for a few years – always more than a bull phase.
• There will be intermittent false rallies, spread over days but within a day or two, all gains of past few days gets wiped out.
• The highs will usually come early in the week and the lows will come later.
• The big “wall of stress” in a bear market - drives your fears to take profits too soon because you are worried the market will turn around on you and prove you wrong.

Clearly, what we saw today was an intermediate correction, with global cues taking precedence and punters using the opportunity to exit. Selling pressure was seen in metal, pharma and banking – precisely the sectors which were overheated.

Let’s not read too much into the correction of today. TCS earnings today evening will set the mood for tomorrow. Use every dip to buy into fundamentally sound stocks with a long term view as the view ahead, into the horizon is not too bad.