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Udayan's Review: To buy or not to buy now
Published on Mon, Jan 21, 2008 at 17:01, Updated on Mon, Jan 21, 2008 at 17:08 in section
Tags: Indian Stocks Market, Sensex
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800 points down but the market is well off the lows of the day, if you want to catch on to a silver lining. Just a little over 18,000 on the Sensex and 5,400 on the Nifty. We had plummeted to really abnormally low levels in the middle of trade today. The market suddenly fell without a bottom, about 1500 points, went down to about 17,500 and from there we have clawed back to 18,200.
There has been some buying at lower levels in many largecap and midcap stocks. Having said that, the midcap index is still down 7.25. So, it is on the mend. But as we have seen in the past, these pullbacks are continuously getting sold into. So, it’s difficult to say with any degree of conviction whether we have seen the worse for the day, though it is likely the way we had plummeted suddenly.
Q: Even if the Sensex and Nifty get away with some kind of pullback, the broader market will be left with a gapping hole?
A: Yes, that is the problem and that was the anticipated problem, that it would be in liquid stock futures, it would be in midcaps and smallcaps. The way some of the midcaps have corrected by 15-20% today, I think there is a lot of blood out there on the street.
When one gets a whack like this, we came close to a circuit down market today, it is difficult to get up and run very quickly, particularly when there’s been a lot of greed out there which has suddenly turned in just two days. So I think people would have lost money in the last couple of days, which is quite discouraging. I wouldn’t be surprised if a combination of margin calls, a cut down of leverage, etc can see some resurfacing of cracks that we have seen today.
For the day, the crack was so wide that it’s entirely possible that we do not go back and revisit those lows, but even a close around these current levels is bad enough. We have got crunched down in just a few days from 6,300 to 5,400, that’s bad enough. I don’t know about the day, whether it is prudent to buy or sell now, but I think we haven’t seen worst of the pain, maybe in select midcaps there could still be a lot of pain because people would have got hurt in the fall of last couple of days, in the futures market specifically.
Q: One word on what the market is going to watch more carefully now, because we were talking about the fact that it doesn’t matter so much what the Nikkei or the Taiwan does, but much of Asia is lumbering quite hard under selling pressure this afternoon?
A: That only adds to the strain on our back. If it was a situation that the globe had stabilised and everything was pulling back, then at some point, our fall might have been sentimentally arrested.
Next: Has the recovery begun?
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