Sensex may hit new low, post elections
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Summer looms as a critical period for the local markets due to the political uncertainty following the general elections. In May 2004, the market collapsed almost 30 per cent post elections, when Sonia Gandhi was chosen to lead the congress parliamentary party amid fall of the NDA. This time, the general perception is that the “third front” will emerge as king maker. If that happens, it may ensure the end of the pre-election market rally and bring about a new low thereafter. Technical analysts say that the current bounce back is being seen as a bear market rally that will be very difficult to sustain even otherwise. Although the recent gains in stock prices brought some cheer with a 30 per cent appreciation in global benchmark indices, the market is still not out of the woods. Corporate earnings for the fourth quarter may be worse than the third quarter and the guidance for 2009-10 by Infosys Technologies also indicates that corporate outlook may not even in 2009-10. The bear markets prior to 2000 have recorded eight counter-trend rallies in excess of 15 per cent while the most recent 2000-02 bear market saw three counter-trend rallies of 20 per cent. The current bounce is just the third in excess of 20 per cent since May 2008. Historically, it is to be noted that in the secular bear market in US commencing 1937, a 64 per cent counter-trend rally ensued the following year before the market eventually took out new lows, indicates Deutsche Bank Global Research. The current counter-trend is in excess of 38 per cent since the benchmark indices, the Sensex and the Nifty, hit multiyear lows on March 9, 2009. It is also worth mentioning that counter-trend in excess of 24 per cent between October 27, 2008 and November 10, 2008 took more than three months for the October 27 low to be breached. If this pattern persists, a retest of the recent low of 8,160 in the Sensex may occur after the election results if the “third front” become king maker. |
(21 votes, average: 3.81 out of 5)
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May 4th, 2009 at 9:02 pm
New lows is a far fetched prognosis(almost like saying hey I love to be a pessimist.. If I am right I told you so but if I am not I am pleasantly surprised)
The Sensex will however crack from this level sooner than later, that I agree. My level for the year would be between 9,500-14,000
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April 18th, 2009 at 9:56 pm
hi,why someone can forget one basic rule of technical analysis, while mentioning the subject ?? the rule is that markets discount the future,and that too by as much as over a year,,so in my opinion the present rally has ended the bear market started from jan-08,we are already in a new bull-phase,the strenth of the rally suggets that, there will be no place for the third and fourth front + economy will improve within next 1 year….cheers !!!!!
April 18th, 2009 at 7:14 pm
BG you have rightly pointed out. It would be highly improbable to see markets hold during the entire process from counting to results. The degree of volatality would depend on the emergence of third front as kingmaker. However the retest of new lows seems a rare case. In addition what is seen as a bear market rally, positive news coming from US seems to play a dominant role in current market rally.
April 18th, 2009 at 7:14 pm
BG you have rightly pointed out. It would be highly improbable to see markets hold during the entire process from counting to results. The degree of volatitily would depend on the emergence of third front as kingmaker. However the retest of new lows seems a rare case. In addition what is seen as a bear market rally, positive news coming from US seems to play a dominant role in current market rally.
April 18th, 2009 at 7:13 pm
BG you have rightly pointed out. It would be highly improbable to see markets hold during the entire process from counting to results. The degree of volatitily would depend on the emergence of third front as kingmaker. However the retest of new lows seems a rare case. In addition what is seen as a bear market rally, postive news coming from US seems to play a dominant role in current market rally.
April 18th, 2009 at 2:15 pm
I dont think market will see new lows unless the election results are really catastrophic. Market has already bottomed out. Positive news has started flowing already from auto, cement and steel. I expect market to rangebount between 10000 to 15000 for this year
April 18th, 2009 at 12:17 pm
B.G. the Journalist - We read.
B.G. the Investor - Which Scripts ?
B.G. the farmer - Grows what ?
Third Front.
But now there is also a Fourth Front.
I am thinking of forming a Fifth Front.
Why don’t you start the Sixth front ?
The Nifty has its own whims and it will swing low to 2,250 and again rise to 3,500 irrespective of the fronts but sympathetic to the Dow. But the Dow itself has whims.
Cheers,
j.
April 18th, 2009 at 11:46 am
Which ever part come to power, this is global recession. Market will come down heavily after elections.
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April 17th, 2009 at 8:34 pm
Irrespective of the party, the rally will not stop. For the US to come out of the woods, India will have to precede them. Indian industarlists must take this as an opportunity to build an alternative for the world over China.
April 17th, 2009 at 10:02 am
A Nielsen study indicates over 200 seats for the Congress as a standalone entity - which is far removed from what other pundits are saying. And Nielsen is confident of their numbers - which possibly explains why the Cong has thought it fit not to pursue pre-poll alliances with some of its erstwhile UPA partners. If that is the case, then chances are that there will be a Cong led govt and your predictions may not hold. Having said that, there would still be a fair amount of nervousness leading up to counting day and one can expect unwinding of positions ahead of that.