Bear hug here to stay, Morgan Stanley reports

The three-year bull run across global markets might be over, leading equity research firm Morgan Stanley has warned in its latest report.

The three-year bull run across global markets might be over, giving way to a full-fledged bear market, leading equity research firm Morgan Stanley has warned in its latest report.

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Bombay Stock Exchange's 30-share sensitive index (Sensex) dropped more than 250 points today to close below the key 10,000 point mark for the first time since February 17, 2006.

The Sensex plunged more than 13 per cent last month, tracking sluggish trends across the global markets and on concerns that FIIs have started offloading their position from the country on look out for better returns from other markets.

Morgan Stanley's Hong-Kong based economist Andy Xie said in a report published on Wednesday that the four-year global growth boom might be over, as the liquidity boom and asset inflation are nearing an end.

The liquidity boom has been manufacturing strong growth through asset inflation -- including property, credit spreads, commodities, and emerging market stocks.

However, as inflation picks up, the liquidity boom and asset inflation will draw to a close, Xie said.

Morgan Stanley said that massive fund flows from the "less experienced retail investors into hot-concept funds like BRIC, commodity, India, China" have led to a global financial mania in the past five quarters.

"The mania has formed in an environment of sluggish global liquidity. Gravity has stopped the momentum, and we think the unwinding is likely to continue," added the report.

When markets are hot, fund managers tend to market their funds aggressively, especially those ones with hot concepts, Xie said.