Market

What If : An Outline of A Conspiracy Theory

Sanjeev

Sanjeev

What if somebody knew the exit polls results in advance, and they did predict a clear majority for the Congress? But this somebody ‘prevailed’ upon the polling agencies to build on the consensus that the UPA was headed towards 200 seats. Or the polling agencies weren’t that smart and did not see such a huge surprise coming. Market

Declaimer: This article written was originally in May 2009 and some of the data points may be outdated.

Sophisticated investors know that every time the “uncertainty quotient” in the markets goes up, there is a dip on a minor sell-off as the market waits for the uncertainty to clear. That is when ‘intelligent’ investors chip in, buying and holding to wait out the uncertainty. This is where the HNI traders make a lot of money, always trading against the market, banking on a reversal as fundamentals work themselves out.

So maybe, as the consensus built up that the UPA was going to get 216 seats, HNIs went short on the market, betting that the increased uncertainty (over Govt formation) would lead to a correction in the Sensex. And on the other side, a bull cartel developed, which had information that there was a surprise awaiting….

That is why the Sensex treaded water through the uncertainty, which should have given the bears the smell of a typhoon developing. But they didn’t run, and their selling was absorbed in higher levels by the bull cartel….

And then…..mayhem!!! The worst stocks, the most unlikely risers, hit the roof. They were all on the Sensex, which shot the market through the roof, led by exactly those stocks which were fundamentally the weakest, and which ‘intelligent’ HNIs would have shorted.

Real estate, banking, infra….the old suspects. What is it about these discredited stocks that suddenly excite the market, after their current reality and prospects are well-known? Not HUL, ITC, or whatnot. They called it “satta plans” in the days of Harshad Mehta.

How do we know whether my theory is true? Well, if it explains the subsequent facts. Watch out now, for a return to reality. A slow dying out of the rally, a sell-off on some minor pretext. The money made by the bull cartel will now be deployed in the actual mid-caps which have superior fundamentals. The market will fall, at least the broader mainstream Indices, but the beta of certain stocks will not track that of the market. The “Beta Divergence” will expand with a broader range, including some negative betas (i.e. some stocks will be flat or rising even as the broader market is falling).

I hate putting numbers to my forecasts, but maybe the market might retrace the entire recent rise or at least 70%. My surmise: there are no genuine buyers in this rally. Nobody bought Infosys in 1800, just after they had put out such a dim prognosis. Only the shorts were covering; as their demand fizzles out, Infosys will limp back (as it already is). The same for DLF, Unitech, and ICICI.

Yes, the action will shift to mid-caps with real stories. The net result: you will have a stock-specific market, but the broader indices will remain in a range-bound band. “Intelligent” HNIs will get rich if they get their specific stocks right, but a broad liquidity-driven rally is unlikely in the short run.

Still, I remain bullish. There is always the possibility that FIIs will allocate more money to India than is necessary, creating liquidity and momentum. But that will increase volatility, and you have to get that right.

All in all, it will remain a trader’s market, the profits going to the person who sells correctly. Buying will be rewarded at all levels, provided you have staying power.

Table of Contents

Share:

Facebook
Twitter
Pinterest
LinkedIn

Leave a Comment

Your email address will not be published. Required fields are marked *

On Key

Related Posts

Scroll to Top

As a participant in the Dr Mentoring Program (DMP) four years ago, I can say with confidence that the program has been instrumental in shaping my approach towards managing operating cash flow and developing strategies for becoming a successful doctor entrepreneur.

Under the guidance of Mr. Sanjeev Pandiya, a seasoned ex-CFO of many listed companies like SRF, Jindal Steel, and Haulonix, the program provided us with invaluable insights into the financial aspects of running a medical practice. From understanding the basics of accounting and financial statements to learning about cash flow management, the program covered all the essential concepts required to successfully run a medical practice.

Moreover, Mr. Pandiya’s expertise and guidance helped us develop a strategic mindset to approach our profession as entrepreneurs. We were taught how to think outside the box and innovate to create unique offerings and build a brand that sets us apart from the competition.

Overall, I can confidently say that the DMP has had a profound impact on my professional growth as a doctor entrepreneur. The program’s emphasis on financial management and strategic thinking has equipped me with the tools to build a successful and sustainable medical practice. I would highly recommend this program to any doctor looking to enhance their entrepreneurial skills and take their practice to the next level.

Regards,

Dr Yatin Shinde
Indapur

Career Guru

Registration Form

Join Weekly Webinar

Please fill this form to get the invitation for my weekly webinars that I conduct for our community. In these sessions I talked about wide range of subjects like investing, personal finance and answer the questions you might have. 

Join The Community

Please fill this form below to join this community of like minded individuals with a common objective ,to build a 3-dimentional understanding of the investing world.