Time to pad up for the long test

While price correction will be faster, time correction has a long way to go, say mavens

MUMBAI: Price falls happen in T-20 mode but time corrections that follow can drag on like Test matches.

As the index nears its rock bottoms, it’s already 50% from the top, there is almost a consensus among the market men that the end in terms of price may not be far.

All Sensex stocks, except Ranbaxy Laboratories, ended the week with monstrous losses and are fast approaching levels last seen at the beginning of the bull run in 2003.

So, while there is little left in terms of prices to fall, what could follow is a protracted period of time correction, wherein market could be trading without direction, say experts.

Ramesh Damani, Bombay Stock Exchange member, says it’s too premature to call a bottom.

“In terms of price, we may reach there sooner than later. But in terms of time, we have a long way to go. It is not a 20-over or 50-over match. It is a Test match. It will not be your typical bear market. It could last much longer.”

Experts see this as an unwinding of the bull run and the effects of this will be seen in the broader economy in the next few months.

This could, in turn, delay recovery.

New highs are out of question for a long, long time, says Mahesh Bhagwat, head of equities, Mape Admisi Securities. “There is lot of connection between the financial sector and the real economy. There will be problems in the production and manufacturing sectors which will be hit by the paucity of funds. The connection between the US financial sector and Indian IT will also affect the sectors and related economic growth that was driven by the BPO sector.”

Damani agrees. “The effects will spill over to the economy almost certainly. Markets typically discount six months in advance. It is a crisis of capitalism. I hope we will rise to the occasion. Because it’s the best thing we have got,” he said.

Finance ministers and central bankers of top countries were to meet late on Friday to decide what they can do to rise to the occasion. There is some hope clinging on to this event also.

Bhagwat calls it a crisis of confidence and trust. “It is difficult to suggest an end to this. I hope this weekend there is some concerted effort to stem the tide after the G-7 meet coming up in Washington.