There was 20,000 then, and there's 20,000 now. However, professional cheerleaders apart, no one can pretend that the big round number that the Sensex has reached means the same thing as it did the first time around.
There's another old saying that as long as the stock market news stays on front-pages of pink newspapers, it is fine; but when the white newspapers start putting it on the front-page, then it's time to run. By that yardstick, we should still be okay. Back in December 2007, when the Sensex first hit 20,000, there was a frenzied atmosphere around the stock markets that was unprecedented. Sure, some investors were cautious, but they were far outnumbered and had mostly given up on rationality being restored without a major crash.
Instead, what we had was the spectacle of apparently sane people trotting out estimates of markets doubling again in another year or two from there. To use an old cliché in the opposite way than it is generally used, this time it's different. In the media as well as in the investment community, in sharp contrast to last time, the primary topic of discussion is how soon stock prices will reverse their course.
No one seems to be dying to know when the Sensex will hit 25,000 (let alone 30,000 or 40,000). Instead, the most sought after piece of wisdom is which stock is overpriced and by how much, and when the stream (not a flood this time!) of liquidity will dry up. Clearly, despite the levels to which stocks have risen, the animal spirits that abounded last time are simply not there now. And that's not something that should surprise anyone. The frightening time that investors had during the crash was enough to scare anyone.
In fact, if you ask any broker, you'll find out that the compulsive punter who was to be seen in huge numbers both in the last bull-run and the one before that is still missing from the action. That kind of trader and that kind of trading gets attracted not by a particular level of the market but by a high velocity of stock rise. That velocity has been missing and the way things have shaped up, we could go a long way without that sort of velocity building up.
In the last two decades, Indian stock markets have gone through four great boom-bust cycles and no matter how deep the shock, each one has resulted in one evolutionary step in the maturing of the investing culture. Maybe I'm being too optimistic but it's possible-just possible-that what we are seeing is a significant new step in that direction.
This article first appeared in The Economic Times on September 28.
This article was originally published on September 27, 2010.
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