If veteran stockbroker Shankar Sharma is to be believed, India is in the grip of a ‘bear’ phase given the speed and ferocity with which markets across the globe fell on Monday.
“I have no hesitation in saying that equity markets are in a problem now, and that includes India,” Sharma told HT from Dubai. “When you compare India with others, we are in a better situation. But Indian markets will also get affected as this is a global phenomenon.”
After the pasting on Monday, the Sensex opened Tuesday with bearish trends, but recovered later to end up 1.1%. But Asian shares widened Monday’s fall, with Chinese bourses falling 7%, and the Shanghai index by 6.4% and Japan’s Nikkei recovering slightly after a 4.6% fall.
Typically, bear operators operate via shorting — a process where a broker borrows a particular stock from a client on speculation that it is likely to fall. He sells the stock he did not own. If the ‘short call’ is right and the stock does fall, in the second stage of the transaction he buys the stock from the market and returns to the lender. The difference is his profit.
Growing market sizes and restricted information flow is changing such calls. “Most bears now find it difficult to operate without adequate information and the increased governance,” said Arun Kejriwal, founder Kris Capital. “Also, dominance of FIIs in the F&O segment has limited flow of market trends.”
During the 2008 crisis, bears did make a killing, with prominent names doing the rounds including Sharma, Radhakishan Damani and Sharad Shah.
“Nowadays you don’t see the same trading patterns,” said Hemendra Kothari, veteran investment banker. “The grip of bulls and bears has changed. These days you have bears and bulls take different calls and it’s no use putting them in slots.”
He has a point. Damani, for instance is known to have been bullish on cigarette company VST Industries, while Sharad Shah has been quite optimistic on Tata Coffee.