Another short upmove in a bear market likely

CNBC-TV18's Head-Markets Research, Anuj Singhal : By now, one thing is clear. This is not a correction as majority was thinking till even 2 months back. We are indeed firmly in a bear market. Now this is interesting to note that even as I write this piece, all the global markets have given a bounce and crude is down quite a bit. But the fact is we have seen such mornings in the past and still, we are at 15-month lows.

Quite clearly, this is a market where you would have made money if you had gone short at any time. Of course you would have made more money if you had shorted the rallies. Whether this means one should short on a possible rally today I don’t know, but on anecdotal evidence, that’s something, which is feasible.

One argument which I have heard from some wise men when asked about banking and real estate is - that nothing has changed fundamentally to warrant the 60-70% carnage that these stocks have seen and the only way for them is now up. Unfortunately, I tend to disagree. We had seen how in a bull market, prices had gone up to levels of irrational exuberance. The same can happen on the reverse side in a bear market. That’s why stocks like DLF, which made newer and newer lie highs during the bull run kept hitting fresh bottoms in the current bear market

From the F&O data, one point that emerges is that traders believe that 3800-3900 is nice range to go out and do some shopping. We even saw some call buying at those levels. But one needs to be very careful about these levels as we have seen in the past, starting from 4800 right up to the 4000 level, all o which were considered sacrosanct and none actually held

There could be some short-term short-covering rally but I believe something needs to change fundamentally or markets to make an upmove. Else, the best strategy would be to short the same stocks which see a bounce on short covering as these are the stocks that will look the weakest again once the short covering is over

DISCLAIMER: The author is not allowed to trade in equity markets including Futures and Options. His only exposure to capital markets is via shares of TV18 and Network18 granted to him as ESOPs by the company and investments in some long-term mutual funds.