When will the bulls get back on Street?

Indian shares, which have tumbled nearly 9 per cent since last Monday, are unlikely to bounce back in the near term.

While the surge in oil prices worldwide was the main trigger for the market downturn, expectations of a deeper-than expected slowdown of the broader economy and high inflation coupled with widening deficits and a depreciating rupee would keep investors bearish for several more months, analysts said.

“The single most important factor that will affect the Indian equity market is oil price, its sustainability and affordability,” said Uday Kotak executive vice chairman and managing director of Kotak Mahindra Bank. Till the time oil prices settle down to a sustainable level, there would be more pain in Indian market, he added.

“If we discern the macroeconomic and political situation, then there is enough evidence to believe that we have entered an intermittent bearish phase," said Amar Ambani, Vice President - Research, India Infoline Ltd."A move to 14,200 on the Sensex and 4,100 on the Nifty seems on the cards in the near future,”

The key issue is whether the current oil price is a bubble or a long-term trend? It is difficult to hazard a guess. Crude prices have increased 45 per cent since January and are currently hovering around $135 per barrel.

Kotak feels that crude would eventually settle down at around $100 per barrel.

Experts further pointed out that any loss for the ruling coalition in the upcoming elections to key states would be a clear harbinger of upcoming political uncertainty. Given these factors, there is no astonishment as to why we are witnessing huge portfolio outflows from India, said Ambani.