Frozen in the headlights….

Jayant Pai |

Many market watchers (who have been reduced to doing just that…watching) are flummoxed by the recent move of close to 20% in the broad indices.

While most bulls are busy calculating their gains, the bears as well as many ambivalent fund managers who are saddled with outsized amounts of cash at precisely the wrong time, appear to me like rabbit who have frozen after being caught in the glare of the headlights of an oncoming car.

They are simply unable to take any action although some of them are bravely trying to talk down the markets. Here are a few examples:

  • The 2G scam verdict is anti-investor and will scare foreign investors away : I feel that if anything, this should help sentiment as foreign investors will appreciate that Indian courts exercise their independence and do not merely bark but bite too. Of course, my condolences go out to the aggrieved foreign investors in question but I do not see them as being representative of all investors. On the flip side, one could argue that the Vodafone judgement will draw hordes of foreigners in…
  • Greece, Ireland et al. : Sure, this sword of Damocles will not vanish from over our heads for quite a while. However, as Gordon Gekko tells Charlie Sheen in Wall Street “Tell me something I don’t know”. Global markets have spent the past year adjusting to the ‘New Normal” in Europe and it may take a lot more than an impending sovereign default or two from the usual suspects, to drag them back into the abyss. Also, even if the European stockmarkets hurtle back, will the rest of the world join in? It appears unlikely.
  • Domestic inflation, earnings and industrial production : Well, food inflation has been falling, the broad indices have seemingly adjusted to lower earnings as well as GDP growth (as reflected in PE multiples which until recently were fairly below historic figures). The gyrations in the index of industrial production no longer elicit more than a gasp or two as everyone has reconciled to the fact that the monthly twists and turns have virtually no predictive relevance.

If at all any further proof was required that markets are a forward looking animal, the rise in the indices since December 2011 should provide that. There will always be disbelievers and charlatans but their numbers will slowly dwindle as the indices continue rising, albeit with intermittent corrections as many hurdles are still strewn on the path to prosperity. However, the sequence of higher tops and higher bottoms may have begun forming and those who are waiting for ‘everything’ to clear up may be the ones who may actually be instrumental in creating a climactic top a year or two down the line. After all money was never made on the foundation of a cheery consensus.


  1. Dear Mr Pai,

    I agree and appreciate your views. People spend too much time predicting the next move of the market despite knowing that this exercise has a poor base rate of success. They forget Neils Bohr brilliant satirical quote ” Predictions are diffcult to make especially about the future.”



    P.s The image shows a rabbit frozen in the headlights of a car and not deer. Possibly the rabbit is predicting that the car would come to a halt before it hits him 🙂

  2. Hi Ankur,

    Thanks for reading and commenting.

    Yes, it is a rabbit but we had to use it as an image with a deer was unavailable. You may consider this as a variant of the term “Poetic Licence” :))).

    Jayant Pai

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