Tuesday, July 6, 2010

A Massive Rounding Top in the Indian Stock Market

From a technical perspective the Indian Stock Market is building a massive rounding top which ties in well with the sentiment prevailing in the market.

We are going to spend the next few years going down.  Each time the market looks like it is off to the races, investors will jump in and subsequently get killed.  It's going to be a very long decline.

Every time the bottoms and rallies, people are going to say "OK, that's enough; it's over." But it won't be over. It's just going to be a long, long process. It will take a long time for Indian optimism to break down and reality to set in that the Indian story is closely linked, like every other country now, to global growth.

Optimism should actually remain dominant through the next two years and even as prices will be edging lower, most people are going to think it's a buy, and you shouldn't get out of your stocks, and recovery is just around the corner, probably for the next three years. And then, for the final half of the cycle, the final three years, that's when you'll get the capitulation phase when everyone finally gives up.

This is a non consensus view, as today the prevailing sentiment in the market is strongly optimistic.

6 comments:

  1. How do you determine sentiment in the Indian markets?

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  2. Unscientifically lol

    The media reporting, the daily articles in the paper, experts on CNBC, talking to my circle

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  3. you are of the view that we will not bottom before the rest of the world? and why would we grind ourselives when/if the world markets collapse?

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  4. sb,

    India will do better than world markets and longer term will bounce back better as fundamentals here are better than US/Eur, earnings growth is pretty impressive though valuations are stretched

    I did not say India will not bottom before/after
    it is coupled with ROW

    Two things to worry about will be exchange rates impact on eps and real estate collapse in selected areas in coming quarters

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