MARKETS - WHAT GOES UP HAS TO COME DOWN!

about 1 year ago
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The market is in the red, today also. The only relief being that its not as bad a fall as it was yesterday.

There is a sense of panic. Many have been calling up, writing emails, Whatsapping, asking whether they should sell off everything and just exit the market for now? Seriously?

Our answer to all is a BIG “NO.” Maybe we are past the panic button now. We are so far into the pandemic and the impacts that its too late now to worry about repercussions.

All of them cited the same reason – the daily increasing infection rate of India, putting it on the No.2 slot on the world map is worrisome. Yes, there is no sign of this virus abating any time soon and most say that the numbers will only keep on rising. The underlying fear to this is a lockdown.

Well, we can and should worry about our own mortality but what we need not worry about is a lockdown like what we saw in March-April. That’s not going to happen again. People are already reeling and if not the virus, another lockdown will kill their small livelihood and life. So, another complete lockdown is not happening. Yes, we might see restriction on movement in the night but that should not be a worry in any way.  It will take more time for trains and the metros to resume full operations and that could hamper movement of people for work. In short, we will most likely continue with the existing situation. People will have to learn to wear masks and practice social distancing, behave responsibly or else, nothing will help us. Europe’s second wave and lockdown is true but then we have not yet even emerged out of the first wave; so what’s our worry when life never ever got back to normal after March?

So, corona raging apart, which has been the case since August, the market probably is worried about the US stimulus getting delayed. With the new SC judge expected to be appointed this weekend, the hope is that once that’s out of the way, Trump will be looking at the stimulus for the industry. The US markets are down and that’s affecting us- that’s how it works. Also, remember, a month before the US elections, the markets there are always very volatile and with 3rd Nov not too far now, this could be the norm in the days leading up to the election.

All these reasons apart, the F&O expiry scheduled for Thursday could be the main culprit. Traders have to either roll over or square-off and that, many punters say is the real reason. Once that milestone is over, it will be back to normal.

Also realistically speaking, this correction is healthy. We cannot have a market which goes only up; such intermittent downs are required to reset the valuations and give us entry points into good value stocks. If you look at this as a correction and not as a fall, the entire perspective changes from fear to healthy.

Another very important indicator that faith in the market remains intact – the primary market is booming. Apart from the bumper subscription and listing of Route Mobile and Happiest Minds, the new IPO, Computer Age Management Services (CAMs), on its second day today, stands fully subscribed. Chemcon, closes tomorrow but yesterday itself, it was oversubscribed 11 times and retail portion by 20 times. The super success of these IPOs shows that investors – retail, institutional and HNIs are very much around, they are not quitting. Thus when primary market is booming, how can we say that things are bleak all around?

In many ways, the stock market is like the weather in that if you don’t like the current conditions, all you have to do is wait a while.

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