India: Bearish sentiment growing

The bearishness is now becoming pervasive; the analysts, talking heads, market volumes are all pointing to sideways or downward markets. We are trading above the June 14, 2006 low of 2632...I expect this low to be taken out before year-end.

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Television commentators, brokerage analysts and newspaper headlines are beginning to look and sound depressed. Perhaps reality is taking hold; capital expenditure plans are being cut back and factories are slowing production through forced closure for a week to two at a time.

Soon we will start hearing forced explanation why our markets are not moving up; all the external factors will have been exhausted and we will have to face up to our domestic issues. Analyst will pontificate about forward looking earnings and then of course multiples will be talked about....all of these comments will project poor forward looking prospects. As a result, I am becoming cheerful about the outlook for our equity markets although I will continue to wait on the sidelines until the Hedge fund redemption pressure abates some more and the financial operators feel more pain.

I expect the market to show a downward slope for some time with volatility decreasing. In a couple of weeks I will start to define my core portfolio for the coming couple of years...however, execution will wait for a substantial decrease in volatility and reasonable clarity in the investment horizon.