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Monday, July 21, 2008

Bull Market Over - Ramesh Damani

On whether history has taught us anything about the bull market and whether we can expect to retrace those highs soon, Ramesh Damani, member of BSE feels that for Nifty, 5000 levels is the line in the sand. He said, "If we cross and if the circumstances change, then we will have to revisit the bear case and say that maybe our strategies and studies are wrong and maybe the world has changed. It's not doomsday, it's just a sharp correction in a bull market."
Damani feels the bull market has ended and will not resume very soon. According to him, the macro economic environment has changed and the indices may not cross the old highs again in 2008. He feels that crude oil prices will be the key to market trend and there will be more pain if rally in crude oil resumes. According to him, it is unlikely to go back to the oil highs for one-two years and Nifty may not cross 4500-5000 if crude remains high.

He believes that it is a great time to pick individual stocks for long-term. The global bull market on easy liquidity flows is over and bond yields are negative due to high inflation level, he said. According to him, equity market is the best hedge in countries like India. He said that the best case bear market rally would take Nifty to 5000 and markets will revisit bear case if Nifty rallies above 5000 levels.

Going back to the history, Damani said that the one thing that history teaches us is that greater the bull market and the ferocity of the bull market, the more time it takes to come back to its old high. He believes that this has been a ferocious bull market in all accounts. A lot of wealth, market capital has been generated and the correction will be painful, he said. He feels that now at every rise there will be sellers who will be stuck and will want to come and sell, so that churning process takes time. So given the ferocity of the bull market, it will take more than a normal bull market to sort this out.

He said, "The key to the riddle of the markets, whether it's bottomed out or it's going to be bottomed out is the price of oil. It's one of the most significant events of our lifetime and if you make the case that crude at the start of the correction will slip to below 100-120, then you can see the process of bottoming out. If you are going to make the case that this is a temporary correction and that the bull market in crude is still alive then going back to plus-USD 150 per barrel can bring a lot more pain in the markets."
Source: Moneycontrol

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