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Friday, May 8, 2009

For the first time since October 2008 the benchmark Sensex of the Bombay Stock Exchange has closed beyond the 12,000. This achievement is not a sign of the fact that the country has came out of the worst economic storm in fifty years but its an indication that we’re at least getting there. Dalal Street can finally afford to give out a smile; restless traders can afford to wipe the sweat of their brow because the buyers are finally starting to return.
By no means should the last statement be interpreted as something which would lead someone to believe that a new bull market has been born .No, India is yet to reach that cornerstone just like the rest of the world.
By all indications it has become clearer that if a new global bull market has to start it has to first lay root in the BRIC countries.
The hectic activity on the Indian stock markets has resembled the highs and lows of a heart monitor. Many a time sellers have resorted to profit booking which has driven down the Sensex,a few months ago this was the predominant trend.
What we are now seeing is that when the sellers are making their move so are the buyers. The latter were reluctant a few months ago because everytime they tried to rally they were beaten down by the bears who were intent on profit booking alone.
Now that the impact of the recession has reduced just a little bit because governments have been pro active in making funding available, things are beginning to change.
The buyers are beginning to return and are slowly beginning to accept market risk. They’re willing to shell out their money towards investments. If over a period of time this trend continues then we can say that a bull market has indeed been born.
The Bombay Stock Exchange and the National Stock Exchange have both seen the return of FII’s.Moreover,the most encouraging fact about the recent spike in the Sensex has been due to the participation of the big Mutual Fund houses.
The very same institutions that pressed the ‘sell’ trigger a few months ago leading to a massive drop in the Sensex and the nifty.
What could spoil the party is the perception that this is only a ‘fake rally’. A phrase often used by bearish traders; it indicates that the situation is just as worse as before or getting even worse and this rally is just a sentimental one or a ‘rebound’. If indeed it’s true then it would be a sad event. The chances of this spike being a ‘fake rally’ are low but its possibility cannot be ruled out entirely.
It is now up to companies themselves to create an easy demand situation in the market. Now that the markets have cooled off they can concentrate on making sure that they break the last line of defense of a recessionary economy by making it easier for the consumer to get back to spending his money.

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