Indian Markets: In Search of...a bottom

Tuesday, November 11, 2008

Extreme Volatility continues in Indian equity markets..volumes continue to decline..the specter of hedge fund redemptions is hanging over the market. The last 5 days trading have the following day change in Nifty:

November 4, 2008 -5.44%
November 5, 2008 -3.25%
November 6, 2008 +4.71%
November 7, 2008 +3.37%
November 10, 2008 -2.77%
November 11, 2008 -6.55% (as at 3pm)

These six days give an annualized historical volatility of 80%. This is ridiculous volatility; anyone who thinks they know what is going on is fantasizing. The price-action in markets is destroying all small time speculators. Day trading is ending...investment clubs are a thing of the past...the Saas,bahu and Sensex set is back to doing what it would normally, gossip and get fat.

Technical analysis for day this market...NOT.

Everyone had an opinion on the markets and expected you to congratulate them on their brilliance...Uninformed opinion has lost its veneer of respectability.

It is back to hard work; proper analysis of companies , industries and the economy. Full blown scenario analysis with a healthy dollop of weighting for fat tails. Managing money and helping people create wealth will be back in the hands of professionals...if not, then there is a lot more pain ahead.

And, there will be a realistic view of expected returns in the future...let us hope.

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