The
bears seem to have a special affinity for the month of May. Its effect was felt
two years ago on an eventful Monday, more precisely, on the May 17, 2004. Market
gurus christened it as the "Black Monday." The monster has made yet
another comeback on the May 22 this year, with the stock market experiencing its
biggest ever intraday fall with the BSE Sensex crashing by 1111.70 points. Truly,
`Black Monday' continues to haunt the investor class. Whenever, the market reacts
in a volatile manner, there is no shortage of expert opinions. The `Monday Mayhem'
is no exception to the established theory. Some commented that the crash resulted
from the metal bubble, while others blamed that, the Fed's peculiar behavior of
raising the interest rates. Some even, blamed the confusion stemming from the
CBDT draft as one of the primary reasons for the flight of the FIIs and yet, another
section of the crowd held that, the recent DP scam is responsible for the market
fall. Reasons may be numerous, but it goes beyond saying, the investor confidence
that was built in the last couple of years was shattered within a couple of weeks.
It
was, for quite some time that the upward swing of the market was almost unstoppable
and an uncanny feeling prevailed in the air. Some experts were heard commenting
that the market was overvalued and it was nearing a quick correction phase. Many
even opined that, it was a case of pure "irrational exuberance", before
the markets tumbled. The valuations were no longer considered to be cheaper beyond
certain levels, which clearly overshot the fundamentals. Taking a closer look,
it can be said that, the momentum led by excess liquidity was primarily responsible
for the bull rally, which reached from the 8,000 mark to the 12,500 levels. Jargons
aside, whether the crash was a correction or not, is a subject of later research,
but, the fall in the market had severe consequences on the entire trading and
investor class. The crash did not spare any section of the market. The equity
values fell heavily, the metals encountered similar fate, and the futures and
the option segment also experienced its own share of misfortune. |
