Scam a Day - Sainik

The last two weeks were really unforgettable in more ways than one, what with one scam a day burning the pockets of hapless investors.

The frontline indices tanked nearly 10 percent, albeit in strange sort of way, the drop was par for the course. As detailed in my previous posts, the period in and around Diwali always produces a drop of 10 -12 percent, so it no big deal in the normal course of events. If it is just normal that is.

If we go by history, the period between now and mid -January is the most bullish period and the mainline indices at times have gone up by 15 percent too. This is the positive scenario.

Now for the not so positive scenario. Very rarely does "bad news" erupt during this period. Even when it erupts - like the Dubai problem last year - the markets take it in their stride and bounce back.

Even the rumblings of the Maytas - Satyam issue in December 2008 - was put on the back burner for a few weeks and the market only sold off only in early January 2009. The last such significantly negative news which did affect the markets was in 2001 - when in December, the Indian Parliament was attacked.

What is on the horizon this time around?

At the global level, the European crisis just refuses to go away and is increasing in intensity every passing day. At the time of writing this, I am getting news that Ireland has finally been bailed out. This makes it two bankrupt economies in the Euro zone. Will this have the domino effect on the other countries?

The markets have already moved on to the next potential targets: Portugal and Spain. While Portugal is a relatively small economy , the elephant in the room is Spain. Another new country added to the "sick" country list : Belgium.

The euro is very weak against the US dollar having broken through key supports just like a hot knife through butter. To think that the key to a bull case for the stock markets is a weak dollar.

Closer home , the CBI raid on LIC Housing Finance and other institutions has all the potential to bring out the can of worms.While the analysts are putting a brave face on the extent of the rot, it would be nice to look at it in the perspective of "There is never a single cockroach".

This can indeed be a "game changer" because of the battering of India's image and the consequent de-rating of PE multiples.

While history is in favor of the bulls, the current environment will make even the bravest bull cross his fingers.