What's going on out there is enough to rattle nerves of steel. The ease with which stock prices are coming off is staggering. Forget the Nifty, the damage which has been inflicted on midcap portfolios is mind numbing. People are talking about value but not too many are buying. In fact, there must be a long queue of investors, global and retail, who would be praying for a bounce simply to exit.
Global risk aversion is at its peak, amply reflected in the Yen's move to 100 to the dollar. Local traders are distinctly bearish and prone to going short at every small bounce as that's the only trade which is generating any profit. Local investors have not blinked so far. In fact, mutual funds have been seeing inflows but everyone has a pain threshold. It is possible that even mutual funds will start witnessing redemptions if NAVs fall much further from here, and the bear market scare intensifies.
Even if the IIP numbers turn out to be an aberration, there is an earnings scare going around. In the last fortnight, earnings of top index companies like ICICI bank, L&T, Tata Steel, ITC and Suzlon have been downgraded by 10-15 per cent by many leading brokerages. More could follow, if the economic momentum decelerates and unexpected hedging losses start getting reported by companies. The signs aren't good. What is also worrying is that many analysts and investors are still quite bullish. They may not be buying but are holding on to stocks in the belief that this is a temporary blip and prices will bounce back soon. Market bottoms usually happen when the last bulls capitulate and I don't think that has happened yet. There is pessimism but not the utter despair that you see in the throes of a bear market.
A lot of blood has been spilt but it wouldn't surprise me if there is some more to come. I don't know about market levels but must admit that I am apprehensive of being surprised by the extent of the downside. People who have seen bear markets in the past know better than to be complacent.