Self Destruct

For as long as I can remember dealing in capital markets, I don't remember witnessing what I am witnessing now. Half an hour back I saw Dow Jones down 300 points, NASDAQ down 48 points. During the day Sensex tanked 800 points and reached 10500 levels and Nifty fell by 233 points. Adding to the trench, Crude is down to $80. So why all the havoc in one go? Is there a message?

Yes there is. Cash positions in the market have jumped which shows lack of investor confidence in futures trading. They are being conservative and playing safe...hence trading in cash. The IIP down 1.3% has raised concerns over India's Industrial growth. Numbers for this quarter are expected to be hit hard and many fund houses have revised their expected earnings.

When an investor with a lot of credit and hearsay information sees 6 months of gains being eroded in a matter of weeks, it is but natural that he would panic. Investors who are trading on sentiments with panic on their mind are initiating a self destruct sequence. In such a scenario even central bank's intervention in the monetary system wont be of much help. You cant reason with an investor at this point of time, especially when every day session re enforces his belief.

If this continues, then a global recession would be inevitable.