The Thrill !

Nothing could be more thrilling than this day! I felt like watching the movie “Black Hawk Down” again. The story was unfolding right on my computer monitor. Yeah, I am taking about the Indian stock market on this 22nd day of May, 2006.

Despite last Friday positive close of New York stock exchange, anyone who had been following the Indian newspapers would have had this expected. The newspapers were highlighting the ambiguity of CBDT tax circular posted on their site. This CBDT circular was partly responsible for the fall of market on Thursday. That time the confusion was for FIIs, which was cleared by the Finance minister himself in evening. But no clarification came for domestic investor. Many would have not formed an opinion about that circular, but the newspaper did it on Sunday. Domestic investors become jittery.

The result, both NSE and BSE sensex fell by more than 10%, hitting the lower limit of the circuit filter, and for the second day in history trading was suspended for 1 hour. But one thing is sure, you got to hand it down to the systems of Indian stock market. They behaved flawlessly, the trading stopped at the moment it should and all settlements were niftily done. Compare it with the software of Japanese stock market, which has failed more than once in recent times.

While all this was unfolding, I was talking with my friend, who is now in London. I was helping him make his first stock purchase. The order was perfectly executed at the lowest price we had anticipated and that’s when it happened. The sensex line started to appear straight, as if the heart of Indian financial market has stopped beating. No news were coming in, just a straight line of the graph. I asked my friend to switch on his TV and tune to Indian news channel, but they were still to report. I was more than sure that trading has been suspended and 2 minutes later it was confirmed. The trading was indeed stopped. In few more minutes, the news came splashing in the business channels of Finland as well.

As I write this, the trading has started again. BSE sensex has smartly recovered half of its fall and is currently down by 540 points. Finance Minister and SEBI chairman have quickly taken cognizance of the fall and they have issued the statement. Well this is too obvious to mention that the long term investors need not panic. Just as they don’t get rich by sensex hitting highest levels, they won’t lose by sensex hitting lowest levels. This is a natural phenomenon, what goes up will come down and what comes down will go up again. The long term investors can wait for the crest to re-appear. Now it is not the time to look at the worth of your portfolio every hour or every day. Since this week also has the last Thursday of the month, the closing cycle for the derivatives the stock index, the sensex could further go down in few days.

Let’s see how it goes.