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Market Watch: We still have miles to go

CNBC TV18 celebrates it's eighth birthday today. CNBC's birthday is always a good time for me to take guard again and ask some hard questions on what lies ahead, writes Udayan Mukherjee.

india Updated: Dec 06, 2007 21:34 IST

CNBC TV18 celebrates it's eighth birthday today. It's only eight years for the channel but it seems like a whole century: so much water has passed under the bridge in this time. From the heights of a crazy technology bull run to a vicious multi-year bear market and then onto the biggest bull market we have ever witnessed in our country; it's been heady. CNBC's birthday is always a good time for me to take guard again and ask some hard questions on what lies ahead. With indices at all-time highs, the natural inclination would be to feel bullish and sure enough, that's how I feel this morning. I don't think we are done yet with this bull market. But then, one usually knows about the end in hindsight, much after the event.

I think our ninth year will see equally sharp moves on the way up and down. Chances of seeing 20-25 per cent moves in a relatively short period of time appear fairly high. On either side. On the way up, I suspect skeptics will be surprised. Further re-weighting towards emerging markets like India will possibly re-rate the market much faster than we expect. A 26,000 Sensex or an 8,000 Nifty is entirely probable in 2008. Equally, could a bad patch drag us back to a 17,000 Sensex or say a 5,000 Nifty? That, too, is quite possible. In fact I would say the chances of touching both ends are fairly high. This, if it happens, will create significant trading opportunities. The key question is whether the leaders will change. Themes like infrastructure and power have been the leaders so far and their valuations do appear very frothy. Not quite like the IT stocks before the last bull run ended but not very far away either. These kind of valuations raises the risk of very high volatility if delivery is even slightly short of expectations.

There are risks of accidents in 2008: global, political and even fundamental. There will inevitably be weeks of utter despair, maybe even more than what we saw in 2007. Conviction will be tested. Those are the times you need to be brave. The dips will come, even sell-offs will and you need to be ready to buy them. The fundamentals are solid, and danger lies in the good news getting discounted far too soon. So, the falls will come only to skim the froth off but as long as the underpinnings remain robust, we are not going into a long bear market. Some parts of the market appear a bit mindless but not all of it. Therefore, it is crucial for other sectors to participate in the next leg of the rally. Narrow, concentrated bull markets don't last beyond a point, as we have seen in the past. Hopefully, by the time we reach our ninth birthday, we will have other heroes to thank for carrying us higher.

Executive Editor, CNBC-TV18