2022 Investment Special: Bulls, bears, pigs and chicken of the street

Remember this day, or thereabouts, two years ago? Like in the United States and many other countries, there was only one way to stay clear of the Covid-19 virus: A lockdown. As industrial activity came to a dead halt, stock prices crashed, oil prices turned negative, and currency markets felt the sharp contagion effect.

The mood was of fear and uncertainty. The BSE Sensex may have been an accurate barometer, tumbling from a mid-February 2020 high of a little over 41,000 to around 27,500 by early April—a loss of roughly 30 percent in less than two months.

The unnerved booked losses. The cautious battened down the hatches. And, for many of the old hands—those who rode out 9/11 and the 2008 global financial crisis—opportunity soon beckoned.  

Fast forward to October 2021. A fortnight before an early November Diwali, the Sensex scales 61,000. Fuelled by easy liquidity, the benchmark indices have more than doubled from the early pandemic bottom. While fears of a disconnect between Dalal Street and the real economy are voiced in certain quarters, the herd on the street is nonplussed. As is the norm at every peak, every other average Joe and Jyotsna is hunting for the next multibagger, tipsters are lowering their masks to dole out advice at cocktail and kitty parties, and fools are treading where angels usually do in saner times. They’re sanguine there’s a ‘Greater Fool’ lurking at the bend of the road, waiting to lap up their overvalued bouquets.

Post mid-January—the last time the Sensex flirted with 61,000 levels—the fools and Greater Fools have been shaken out of their euphoria. Putin’s war in Ukraine has unsettled the global economy, and markets have duly corrected. The Indian indices were down 8 percent from their peak (as of mid-March), and the bull run has ground to a halt, although at the time of writing the indices had rebounded. But the volatility may be here to stay.