A Monday To Remember

Never ever in his wildest dreams would Dr.Manmohan Singh have thought about this. The man who become a politician by accident and a Prime Minister by reluctance is now only the second man since Pandit Jawaharlal Nehru in the history of India to serve as Prime Minister for two consecutive terms. While his election victory was modest at his Congress Party’s headquarters, the scene at the Bombay Stock Exchange has been totally different in the last two days. The party has begun leaving many to think if we are indeed in a recession. A two thousand point rally on the Sensex within sixty seconds has established 18^th May, 2009 as the day on which the world saw the largest intra day rise on any index anywhere in the world.

This past Saturday when India had learnt that it will have a stable government without too many nagging coalition partners and most importantly no communist left to support the government; the verdict was out: a stable government which is reform oriented headed by a former Finance Minister and Governor of India’s Reserve Bank will take charge and oversee India’s journey through the global financial crisis.

Analysts had predicted that the Sensex would rejoice by making a huge jump the very next trading session. Some said we’d see a 5% jump. Some said that we’d see a 750 point gain. Some stretched their necks and predicted that the Sensex would see a 1000 point gain.

What we however saw is history. The bulls were on a charge after months of being in the doldrums.

The bear cartel had slowly and systematically sucked the life out of the Sensex trying to make money any possible way. Thousands of small investors have lost their life savings as a result.

On Monday however the story was different. Strong global cues, the defeat of the communists and the return of Dr.Singh as the Prime Minister pressed the kill switch for the bulls. They were on the rampage. The bears were sent packing. Many of them were trying to cover their short positions .In simple words they had no option but to buy stock instead of selling it.

The result saw the market shut down twice on Monday. The first time was after the Sensex hit the upper circuit, the second time it hit the upper circuit after two hours the roof almost came off!

SEBI had no choice but to suspend trading for the day. Investors were jubilant all day around the BSE.

Today by contrast was a different story. Logic took precedence over emotion and jubilation. Yesterday’s euphoria was being consolidated. At the end of the day both the Sensex and the Nifty had closed at almost flat levels.

The market movers are yet to turn bullish. Mutual fund houses are sitting on piles of cash which they’ve hoarded for months. There is a case for them to turn that capital loose and put it to work.

FDI’s too are waiting to unleash capital albeit in very small phases once the government puts its economic reforms on track.