Are we at an inflection point?
It is every investor’s dream to catch a market bottom. But, catching a bottom is an elusive hunt as nobody knows it before it happens. The markets show excessive pessimism at lower levels and unrelenting optimism at highs. Interestingly, the reversal in sentiment often happens swiftly. The reversal is caused when even the sellers lose hope and see through the futility of selling at abysmal prices. When sellers lose hope and withdraw, the supply reduces and buyers start to crowd the buy side. The non-availability of enough supply actually causes a reversal and this in turn raises prices to more realistic levels where supply returns. At that level, the demand and supply are better balanced and the markets begin to consolidate. Are we at an inflection point? It is hard to say. But, the pessimism seems to be systematically orchestrated by the business media and experience tells us that excessive pessimism doesn’t last too long.
The week was marked by turbulent trades. Large investors were indecisive. The markets were directionless and unpredictable. This kind of a scenario is not unusual to our stock markets. But, viewed in the back drop of global concerns and the stalemate in domestic governance, this scenario has unsettled even seasoned investors. Nobody is willing to step in and buy boldly. The week saw the tentativeness spread and impact even the rock solid companies like HDFC and ITC among others. The markets have a number of factors to discount next week. Globally the Facebook IPO will set the market mood. Falling oil and gold prices are yet to be factored in. The churn in global currencies will possibly take a bigger scale. The markets await a big impact event that will set a decisive trend. The domestic markets look forward to the onset of the monsoon on the country’s western coast. Meanwhile, the results season will continue its uneventful run.