Oktoberfest has started in Germany, but the Oktobercrash is nowhere in sight. And with each passing day, I’m getting more and more pessimistic about the possibility of it (rather than sounding optimistic, I have tried to use a double negative here).
1. To start with, I don’t see too many companies posting very bad results. Most of the times before the crash happens, the results are really bad (like in 2008) – which though not the final trigger, but atleast contribute to the weak markets. This time around, with the lower expectations, results won’t be ‘exceptionally’ bad for most of the companies. Hence, one of the crucial requirements of a crash is missing.
2. Another factor which shoots down a possibility of a big crash is the fact that rarely have the markets crashed in two consecutive Octobers. Historically, we have had crashes separated by a decade or so (atleast in near history, with 1987 crash, followed by 1997 Asian crisis, and 2007 credit crisis). So, it might be too much to expect a crash in 2009. I would rather put my money on a 2017 crash here :).
3. Last year, there was a great uncertainty in the markets – job markets as well as asset markets. No one seemed to have any clue as to how many banks would go under, or who’s next, or whether one would be left with any jobs at the end of the year or not. There was panic everywhere, and people had put on hold all their investment plans – manifested in the falling property prices, no IPOs, decelerating loan growth, etc. Somehow, this time around, that fear is missing. Property prices have risen by 20-40% in Mumbai, people are no more ‘too’ concerned about their job prospects, and all the asset classes are booming. Somehow, the fear factor seems to be gone.
4. Relentless FII buying in India is in fact making me believe that we may be in for a big rally soon (even from these levels). FIIs have bought stocks worth USD 12-13 Billion this year, and this is inspite of the initial selling in the months of Jan and Feb. To put figure into perspective, in 2007, FII had bought stocks worth USD 17 billion, and in 2008, they sold worth USD 13 Billion. So, the buying this year is almost on a record scale, and won’t be surprised if the locals start jumping in anytime now. Post-diwali, I think there would be a queue of people trying to get into the markets, and that might take it another 10-20% from here.
So, I would stick with my year end estimate of 20,000 on the Sensex. This might sound ridiculous, but then, 2009 as a year has been exactly that.
1. To start with, I don’t see too many companies posting very bad results. Most of the times before the crash happens, the results are really bad (like in 2008) – which though not the final trigger, but atleast contribute to the weak markets. This time around, with the lower expectations, results won’t be ‘exceptionally’ bad for most of the companies. Hence, one of the crucial requirements of a crash is missing.
2. Another factor which shoots down a possibility of a big crash is the fact that rarely have the markets crashed in two consecutive Octobers. Historically, we have had crashes separated by a decade or so (atleast in near history, with 1987 crash, followed by 1997 Asian crisis, and 2007 credit crisis). So, it might be too much to expect a crash in 2009. I would rather put my money on a 2017 crash here :).
3. Last year, there was a great uncertainty in the markets – job markets as well as asset markets. No one seemed to have any clue as to how many banks would go under, or who’s next, or whether one would be left with any jobs at the end of the year or not. There was panic everywhere, and people had put on hold all their investment plans – manifested in the falling property prices, no IPOs, decelerating loan growth, etc. Somehow, this time around, that fear is missing. Property prices have risen by 20-40% in Mumbai, people are no more ‘too’ concerned about their job prospects, and all the asset classes are booming. Somehow, the fear factor seems to be gone.
4. Relentless FII buying in India is in fact making me believe that we may be in for a big rally soon (even from these levels). FIIs have bought stocks worth USD 12-13 Billion this year, and this is inspite of the initial selling in the months of Jan and Feb. To put figure into perspective, in 2007, FII had bought stocks worth USD 17 billion, and in 2008, they sold worth USD 13 Billion. So, the buying this year is almost on a record scale, and won’t be surprised if the locals start jumping in anytime now. Post-diwali, I think there would be a queue of people trying to get into the markets, and that might take it another 10-20% from here.
So, I would stick with my year end estimate of 20,000 on the Sensex. This might sound ridiculous, but then, 2009 as a year has been exactly that.
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