Gloomy Week, Where Are We Headed?

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The market mood in early 2012 reminds us of the year 2001. Then, the tech crash of 2000 had scared investors away from equities as an asset class. The fear of more bad news and prolonged weakness in economic sentiment was pervasive. Nobody was sure where the new market leadership would emerge from. Skeptics wondered if the euphoria of the tech boom could ever be replicated. To many, bullish sentiment was something that was very far away and inconceivable. At the beginning of 2001, a bull market looked too distant if not virtually unlikely. The bulls were battered and picking up the pieces. Yet, it was in that year that the seed was sown for a bigger bull market. Will history repeat itself?


The birth of a new year is often a catalyst for a change in sentiment. Investment strategists and fund managers habitually shift strategies and change their investment outlook around this time. The global investment strategy of large funds shift focus and the preferences of investment destinations change as a New Year rings in. Funds often sell in a country in a New Year after buying right through the previous year.

The India strategy of FII’s is yet to unravel fully though they have been less negative in the first trading week than most people expected. A decisive shift in strategy will be apparent only a few weeks into the year. Meanwhile, certain nervousness is in the air as domestic funds are virtually dormant in the absence of decisive FII actions. The coming week should surely clear the air and set the market mood. Investors mostly remained on the sidelines waiting for better visibility.

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