OPINION | Hypoglycemic hallucinations in an Indian ‘Bear Market’ 

Shankar Sharma is an Ace Investor, and founder of Gquant Investech, an AI Tech firm

Most of us start out in life being reasonably intelligent.

And then, we run into a bull market.

Look, I desire an Indian bull market as much, if not more than most other people in the country. I still have significant investments in India, albeit a lot less than what I had two years ago. I have also put more money to work in India in the past 13-15 months.

But just strong desire for a bull market is inadequate magnetic pull for the cast iron bull positioned at the BSE entrance, to run up to the (now dead) trading ring.

In the thrall of chaperones of Caged Capital

Of course, it's a tad harsh to expect newbies who entered the market less than a decade ago, to become clear thinkers like Thucydides.

Look, these kids largely live in India and largely get perfumed prattle sexed up as investment wisdom, from chaperones of Caged Capital.

When I travel to Bombay, I am never less than impressed at whoever I meet, has exactly the same lines, for example, "The whole world is jealous of India's rise and that is why Indians get beaten up everywhere. It's not because of the paan they spit out at Trafalgar Square or the dinner they eat on airport floors".

Okay, so I am in a good mood today so let's humour ourselves and imagine that the codswallop detailed above, is certitude.

My ‘Lalita Pawar’ portfolio

My good mood stems from because of largely from one factor: The Korean Salmon DNA serum I have started using lately it's quite unbelievably good. It could make Rakhi Sawant look like Madhubala (Actually, my good mood also stems from another thing Korean: the stock market. Despite the 14% crash, it has still made me a ton of money last few months.)

But one look at my India portfolio very quickly negates the effect of the serum and I start looking like - horror of horrors - Lalita Pawar (Newbies, you have no clue who she is/ was, but do go see her on YouTube. You will get the drift.). Or maybe, even like Om Puri, bless his soul.

Hypoglycemic hallucinations in a Bear Market

Last couple of years and last year in particular, have been seasons of utter desperation for domestic investors. The attractively wrapped dream of easy money has been dissolving, tick by tick.

And in this pleading, dolorous state, people have started imagining things.

You see, when you are starving, your blood glucose runs very low. This hypoglycemic state triggers hallucinations.

"Behki behki baatein" type neurological storms.

That's exactly the symptoms on display in the Indian market commentariat since the Bear Market started around 1.75 years ago.

While there have been multiple severe neural fractures on display ("Ratio of Sensex to all kinds of stuff like Gold Silver, Mongolian stock market", " Markets are cyclical", " Markets are mean reverting"- nobody ever told us what exactly this mean reverting thingy means, i.e., when it started, when it ends etc. etc.), let me pick just two from the buffet table of this vapid dunce-feast:

Trope No. 1:" FII selling is the main/ sole reason why India has been in a Bear Market. Nahi toh..." 

I got into a bit of a Twitter exchange with somebody who was propounding this theory. I asked him for data - based proof. I got none.  Not surprising because making under-analysed, over -simplified, lazy opinions is central to this low IQ Bull Market.

So, I (re)ran the numbers.

Here is the table that lays bare the utter imbecility of holding this Trope No. 1 dear.

The data in the table above is at 100 decibels: that there is next to no meaningful correlation between foreigners' selling / buying and the performance of the Indian markets. 

For the more statistically oriented, I have also run causation on the data. Nothing worth reporting there either.

(Of course, one inexplicable trend visible is that pre-2010, the correlation was almost zero, even though the FII numbers were substantial. I need to dive deeper into this to figure this one out).

To innumerable posts on Twitter talking about daily FII- DII Buying - Selling numbers and spinning some cock & bull stories, I have always countered, saying that both statistically and anecdotally, I have never seen any correlation between flows and market movements.

Having been an institutional broker for decades, executing billions of dollars of trades, I can authoritatively tell you that there have been many days in which we have sold aggressively for FIIs and the stock concerned has closed higher. And vice versa.

Somebody's large buy or sell transactions does not have any lasting impact on market direction, only fleeting impact cost (To be fair, buy or sell transactions only affect illiquid stocks, but foreign investors are concentrated largely in liquid large cap stocks only, where in there is no durable impact of buying or selling.).

One usual argument if one can call it that, lamely proferred, by the adherents of this Trope, is a counter -factual: "But if foreigner selling had been lower, our markets would have been much, much higher because of the strong SIP flows".

Without getting into expletives, let me address this calmly: if strong SIP flows had not been there, there would have been no FII exits. The existence of such buying liquidity created the sales from the foreigners. If this side of the liquidity had not existed, the selling side of the liquidity would simply not have existed either. You cannot buy into vacuum nor can you sell into vacuum.

Buy always equals Sell. Rest is low quality, tawdry fairy tales.

Trope No. 2: " The US Trade Deal is all that is standing between India and a massive bull market" 

When President Trump announced his massive tariffs on India, the street reaction was " these don't matter. Indian exporters do not have any meaningful share in India's profit pie".

Correct.

So how come suddenly this became the sole important factor preventing the Sensex from going to 200,000 or whatever it is that delusional analysts and fund managers trot out?

Let's get some inconvenient facts out of the way, shall we?

A) the increasing tariffs happened sometime in the third quarter of calendar year 2025. The Indian bear market started in the third quarter of calendar 2024.

How exactly can you blame an event subsequent to a happening, as being the cause of that happening? One really needs to be low on glucose to even propound such a theory.

B) the total merchandise trade between India and America is around $120-130 billion dollars. (~ $85 billion exports~ $ 45 billion imports).

The total trade volume comes to only about 2-3% of GDP and India's US exports are just 2% of GDP.

And of course, as very helpfully pointed out by the very same experts last year, Indian exporters to America have virtually no contribution to the market earnings pie chart.

So when the entire export basket from India to America is just 2% of India's GDP and probably the same in terms of profit contribution, how would any resolution of this problem be a massive upside for the Indian stock market?  Truth be told: the trade deal probably harms India, and does not benefit India's stock market in any way.

C) Lost in the vacuous vapor of Caged Capital 's gaudily architected concoction is an unadorned fact: that a trade deal contains a word called " deal". What that means is that it is a deal and not a free pass. A deal, by very definition, means a give and a take. India has had a free pass on the American consumer for a very long time and the trade deal simply is a method by an importing bloc (US or EU or whoever) to level things up a bit.

Therefore, inherently, the "achievement " of a trade deal with America was only going to achieve one single, undisputed outcome: that India's annual surplus of $40 billion gets reduced. Whatever else happens or does not happen is all in the wild blue yonder of pure mirage-making.

The goal of the trade deal floated by America was simply a reduction of this very imbalanced trade picture with India.

And that is pretty much what was achieved by the trade deal (which of course is apparently yet to be signed but I do not think India can use this technicality to get out of signing it).

Sum and substance, you can take one simple, sure-thing bet: India's surplus with America will reduce. We got a free ride for too long and America wants to end it. And end it, it will.

What this does to the Indian Rupee (in addition to oil), is the screenplay for a stock market horror flick.

Two (Red) Herrings and a Funeral 

Foreigner selling and the trade deal have been the two biggest red herrings I have ever seen in the history of Indian markets. They mean nothing. They amount to nothing. You cannot add two zeros and make a 1. But that's what this vanishing bull market has transmogrified Indian stock market intelligentsia (like I said, I am in a generous mood today) into a massive body of people with no capacity for basic commonsensical thought.

This is the final funeral of nuanced, clear-headed analyses.

Simply because we aren't willing to admit that we were indeed the world's largest collective of investors with brains on holiday: what else do you call folks who were buying Trent, DMart, Dixon, and plenty others, at PEs 10x their global peers, and then expected them to experience something called a " multiple expansion".

Buy wrong. Sit long.

The Bull Market's slothful largesse made people indolent.

The Bear Market's excruciating starvation has made people silly.

Saying Goodbye is always difficult.

Specially, when she was bright, beautiful, vivacious.

Our bull market was all that. And much more.

(Shankar Sharma is an Ace Investor, investment philosopher and founder of Gquant Investech, an AI Tech firm.)

Views are personal, and do not represent the stand of this publication.