The 490-point reversal in Sensex can be the start of a long-term bear market in India
Rohit Pande
Oct. 8, 2007

The Sensex shot up 209 points in the morning trade but from there it fell 490 points to close well below the 18,000 mark. This may be the start of a new long-term bear market in India.

India’s massive long term bear market will start when the foreign financial institutions believe that Indian market is too high and they start withdrawing.

In every stock market foreign buying creates the bubble. This happens at the very last stage of the bull market. The reason is simple. The foreigners do not understand the internal dynamics of a local economy. They jump in late in the game with big money. That creates massive uncontrolled rise in the stock market. Finally when these FIIs use up all their capital allocated for that economy, they start taking profit. Panic ensues and the market goes down violently creating the stage for economic depression and the long term bear market.

India saw the same pattern over the last two years. Even if the stock market goes to 20,000, first it has to correct back to well below 8,000 – and that is more 50% retracement.

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