Mindless panic in the morning, savage short-covering in the afternoon. That sums up the story of all global markets on Friday.
It started with the Dow on Thursday night and the pattern played out across Asia and India on Friday. Most Asian markets plunged in midday trade as the yen soared to 112 to the dollar, knocking the Nikkei back 6 per cent. We panicked and the Sensex collapsed below 14,000.
The Nifty cruised through its 200-day moving average. For a while, it looked like May 18, 2006, as blue chips fell mindlessly. It was clearly getting oversold and a technical bounce was on the cards. Sure enough, shorts started covering, the Nifty futures discount narrowed to just 3 points and stocks recovered a significant part of their losses.
By the time we closed, some global jitters were visible again and the bell struck on a somewhat uncertain and tentative note. It is back to Dow watching again. The scene is set for some more of a technical bounce if global markets support that. If not, back we go to testing the 4,000 levels on the Nifty. It has been a smart looking pullback from an important support but may still be premature to conclude that we are completely out of the woods. Yes, valuations are reaching reasonable levels again but liquidity adjustments are always difficult to predict. From all the anecdotal evidence we have, it seems the US credit scare and the liquidity withdrawal syndrome has not reached a final crescendo yet.
At Friday’s intra-day low, a lot of stocks, large and mid-caps, were available at attractive levels. This is not to say that the same may not be available at much more attractive prices in the days to come, yet there is no certainty in that. The index may have bottomed out on Friday for all we know. Or it could be going to 13,000 next. Since none of us can ever predict that outcome, the idea is to chip away every time the market gives you panic opportunities. It is how good batsmen always put the bad deliveries away for boundaries, and bide their time for the next one. One stroke at a time, that is the best way to approach a market with a million uncertainties.
(The writer is Executive Editor, CNBC-TV 18)