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When monkey will come down?

The atmosphere of stock trading is cyclic and seasons come and go like in our real life. But there are some differences. You know well when the winter season will come and end. Likewise, you know about every season like the summer, spring or rainy seasons. In stock trading you don’t know when the spring will come and go. But if you are a seasoned trader you must be knowing as which season traders are in nowadays. And even while you come to know about your trading season with some degree of certainty it is really impossible to predict which day will be normal and which choses to be an aberration for  the declared season. And the patches of aberrations can be so long that you begin to believe that actually the season has changed wholly. The moment you take a move befitting to your assessed season indices you are forced to believe that the declared season has not passed away and is here to stay much longer to an indefinite period.

                                 (Graph courtesy- BSE website)

While analysing the sensex graph I had concluded that pre-pandemic level i.e. March 2020 was a sane level of around 41000 which was arrived through reasonable pace of rally. Though the pace of Sensex during 2008-2020 seemed somewhat slothful but it could be said reasonable in view of the almost depression like situation prevailing all around the world. And in March 2020, at the onslaught of Corona, this index took a nosedive to 28000 level which was well expected. Thenafter it was expected to rise gradually to some notches around 40000. But what happened was mesmerising. It went up and up and up for 20 months in a row though of course with some intermittent and insignificant slips. The only logic behind it was the positive sentiment of people that the world will not last in corona and quite a large number of people will survive even after it. And when the vaccination came, the sentiment of the people at large was as if in revelry. Many shops remained closed, many factories stopped production during the covid menace. So the people were left with negligible choices to spend money. More money remained unspent and this led to rise in phenomenal liquidity. This added with the victorious sprit over corona added to the somewhat insane upward movement of the Sensex from 28000 level to 61923 just in 19 months.

Then I thaught that well if it has risen to the Everest level then it must climb down soon and fast. Though I am still confident that it will come down to a reasonable level of around 50000  in line with the annual 10% growth like 40000 to 44000 and then to 48400. See, I have already taken 10% CAGR in place of the usual 6% that is taken for a developing country like India still it is looking like a far cry. The monkey will come down but when only God knows it better.


Author - Hemant K Das

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