History may rhyme, it doesn’t repeat itself’ (Twain). Or that, “the only thing that is constant is change” (Heraclitus). blogThese two famous quotes apply to the financial markets as much as anything.

The way the mid and small caps in the Indian markets are trading gets to sense the equity markets are either at the start of a bull run breaking out higher or are on the verge of a break down lower.

Just correlate with layers 2007 and early 2008

  • Sub Prime issue was lingering in the mouths of traders for three years before the pain struck. Now, Greece is lingering for five years. Markets did not price in the Sub Prime issue. Now markets have under-priced Greece exit.
  • When the major markets peaked and languishing in ranges we have seen for about three months a surge in Indian equities (along with mid and small peaking to astronomical levels) then eventually Indian equities crashed.

 

  • Worries of Lehman bankruptcy was complacently taken saying ‘ it is too big to break ‘. Now a worry of Deutsche Bank is being taken lightly saying that Germany will not let it sink.
  • Indian Rupee was appreciating when the peer country currencies were weakening. Similar is the issue now.

 

I will conclude the above with Warren buffer Letter “We’ve long felt that the only value of stock forecasters is to make fortune tellers look good. Even now, Charlie and I continue to believe that short-term market forecasts are poison and should be kept locked up in a safe place, away from children and also from grown-ups who behave in the market like children. However, it is clear that stocks cannot forever over perform their underlying businesses, as they have so dramatically done for some time, and that fact makes us quite confident of our forecast that the rewards from investing in stocks over the next decade will be significantly smaller than they were in the last.”

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