It’s been mixed across global markets. But it is disappointing that we started off with a bit of a green on the Asian screen and all of that has turned into red. Nikkei is down, China is down more than 2%, Korea was in the green but now in the red. Hang Seng, which was up about 150 points, is down 150-points now. Taiwan consistently for the last couple of days has been exhibiting some strength. But the rest of the markets are all down in the red. Of course the cuts are not deep and that’s the good part of it. But still there is red across the Asian screen once again.

On the day ahead:

We might have a flattish kind of day because we did find some support between that 4,800-4,900 zone. We have fallen quite one way in the last two-three days, straight from 5,300 all the way down to 4,850 kinds of levels. So it has been a sharp fall almost 8%-10% kind of fall in a matter of just a couple of days.

The market in the near-term might have exhausted itself a bit on the way down and it may not fall just immediately. But the pullbacks are getting shallower, and the falls are getting deeper. So even if the market were to stabilise in that 4,800-4,900 band and maybe even gets its head above 4,900 for the moment, and let us see what the data towards the end of the week is from the US and then I think that might determine whether these kind of support levels hold out at least for the moment or we are going lower than these levels.

So it will be maybe a flattish kind of day, maybe in that range of 4,800-4,900. Broadly speaking a bit of red in the morning, maybe a bit of recovery towards the second half. But conviction is so weak right now that one would be surprised to see a tearaway rally or anything like that from here.

One should remember that tomorrow our markets are shut. So we do not even respond to what is going on in the global arena and we come back straight to trade on Friday. Maybe people will be a bit skittish towards the second half to keep their positions open fearing what might happen over the next 48 hours because 48 hours is a long time in the current context. Maybe shorts might also cover up a little bit and longs might also unwind.

So it makes for a flattish kind of session at the end of it all today, but these days you never know.

On a possible bear phase:

Whether you are in a bear market or not is probably not a matter of subjective opinion. The screen tells you when you are in a bear market. We are not suggesting or predicting anything like we have entered a one year or a two year bear phase or anything like that, the entire time saying right now is that everything that has transpired in the last couple of months and whatever that is leaping out at you from the screen, is smacking of a bear market.

Bear markets in the past have smacked of exactly what’s going on now. Nobody wants to buy, all buying is getting deferred. Stock prices are falling and falling to levels that would appear to have value. There is cash lying out with institutional investors, freshly raised too and that money is also not coming in.

Internationally there is a liquidity crunch, money maybe cheap but it’s not available as somebody put it eloquently yesterday. So it is one thing to say oh the Fed rate is only about 2.5% so there must be abundant liquidity in the world. But there isn’t much liquidity one is seeing for the equity markets right now and deals are drying up.

So there is a liquidity crunch that doesn’t sit at the face of very low global interest rates. But sadly that is the ground reality at this point in time. Prices are constantly grinding down, support levels are getting broken with ease, and you are seeing complete apathy from investors.

All these are very classic signs of a bear phase. My sense is that we are in a bear market. The debate shouldn’t be whether this is smacking of a bear market right now because it is and that is the observation from the screen for anybody who chooses to be a little unbiased and candid about it. The question is how long could it be? So that’s the point of debate on whether this will be a 3 month bear market, 2 months already into it, will it be a 6-month bear market, or will it be a one-year bear market. We don’t have the answer to that.

Fundamentally it’s difficult to argue for a one-year plus kind of a bear market but strange things happen in bear markets. For the moment, my own feeling is that in 2008, in early days we have entered a bear market out here and that bear market is entering its third month right now. So we are already one quarter into a bear market or just about getting into a quarter.

Can it last longer? That’s difficult to say. But everything from the screen is telling you that we are in a distinctly bearish patch at this point and to see the screen and say that we are in a bull market right now would just be in denial.

Longer-term bull markets might be intact. But what you are sitting on today I think smacks completely of a bear market.

On the liquidity picture:

It is not easy to predict what the money will do going forward. All you can see now is that local liquidity traders are out of the markets, volumes are pathetic. Local individual investors have probably not started buying in a big way regardless of good valuations. I don’t think they have had the conviction to go out and buy.

Mutual funds are sitting on a lot of cash and they are just not buying and on Monday, it was surprising to see those figures of mutual funds which sold Rs 450 crore net of stocks. They have raised so much of cash and just for this bit. In any case one wishes the market goes up and I hope that something happens globally and we just change our sentiment around and the market stages a surprising V-shaped rally. The chances of that are not that good which is probably why the money is not coming in.

But if that were to happen, I think mutual fund managers would have a lot of egg on their face because they have been given money to put into the market and they are just simply taking market call and not putting that market in.

Probably the market will be kind to them given the current conditions and they will not have egg on their face but if the market were to stage a smart rally then mutual funds would have no recourse but to chase prices there and they would have done a big disservice to their investors who have trusted them with their cash because then they would be underperforming, having not put in money when prices were low and buying at higher levels.

But the scenario may pan out to their advantage now which is why they are staying on the sidelines. There is no great selling from FIIs and just looking at the numbers, everybody says, we won’t buy now because FIIs are selling. FIIs are not selling a lot of stock. Even yesterday their provisional figure was about Rs 500 crore net on the cash market and on the futures market they bought about Rs 500-600 crore or more of stock futures and essentially those are two legs of the transaction because once you net it out you’ll figure it out that they are covering up some of their arbitrage positions because cost of carry has dipped.