Skip to content

Unwise Predictions: Can news make or break markets?

November 28, 2008

Mumbai erupted with perhaps the most dangerous and sinister activity on Wednesday night. Mumbai coudnt sleep that night, as its sons and kids cried with anguish over the demonic acts of terrorists.

The terrorists came via sea route, spread unaccounted,unchallenged terror and holed up in three of the most poshest and glowing symbol of emergence of modern India.
One was Nariman Point. The same Nariman Point which forms one of the unmistakable landmarks in the Mumbai skyline.
The other was a building which stood for everything Indian, right from its defiance to British colonialism, to a healthy dash of Indian architecture when Western Gothic architecture were ruling the roost. A 105 year old heritage hotel of Tata flagship company, The Taj Mahal Hotel and Palace Towers. It was so posh, so stylish, so ‘heritage’ that only the creme de la creme stayed. And of course the foreigners who loved to have a peek at India.
And thirdly, was Oberoi Hotel, another epitome of Indian boom.All three symbols of India’s growing opulence and terrorists targeted with impunity unknown. As they say “Turn Ahead for Hell!”

Hostage situation, continous grenade lobbing, machine gun rattling and the cry and anguish of familes of over 10 people who died. Mumbai saw it all and more.

The smell of blood hung large in the Mumbai sky and crimson stained clothes still slept uncared in the chaos of terrorism.It was 26th Nov 2008,2100hours.A Wednesday.

In a swift move, BSE decided to keep the shutters down for the next day.NSE followed, MCX and ofcourse MCDEX also followed. This was explained as a move to counter any panic rallies[read :a crash] on account of the limited information people had.

The entire day, the brave soldiers of NSG fought what was perhaps a war like situation in their home land. It was an acid test. And as day gave way to night, the fighting continued. It was horrific dance of death and mayhem. Chaos.

As the morning dawned and the first rays of sun, touched India, Mumbai had already seen a lot. The battle was continuing for over 35 hours.

The markets opened. As the NSG jawans for fighting the battle of their lifetime against a few of near-animalistic instincts who held Mumbai to ransom, markets first opened flat. Dipped low, near to midday and then rallied sharply to close higher.

NIFTY on 28th November,2008: Mumbai saw a terrible night before,yet market closed positive


What does it mean? Is the market and the Dalal street so materialistic, that its seeing potential of business in such a tragedy? You might make such a wrong decision if you think from this perspective. But the real perspective is, news seldom, very seldom affects markets.


You might argue, what about wars? Yes, definitely. But do you think the day when wars break out markets fall? And even the moment before that news everybody were busy eating peanuts? The truth is the news gets accounted automatically although as positive or negative depends highly and solely on the prevailing social mood.

30 scrip benchmark Sensex closed positive amidst increasingly negative environment


Take the 9/11. A black swan. It fell. But only that day, [largely due to the fact that it was already in a bear run]. The markets soon turned and ran.

Back home take Gujarat earthquake. Stock market rallied. Strange isnt it. It thought, the tragedy will give strong businesses to rebuild Gujarat. Blame it on, social mood.Incidentally Templeton has come up with its Buy call for India. Surely a good decision from a contrarian investor.

Some other posts of note on socionomics are:

Of Golf,Women and Markets:Social Moods in the play: A piece on rising and falling popularity of golf in the light of social moods

Hemlines of Brazil: A slightly ‘male’ piece on a great sociological indicator

Panic Alert: Level3!: A post on increasingly negative social mood in the investment world in India and abroad

Suddenly Something: A piece on socioeconomics, Google, evil and corporate image.

If you like what you saw and what you read, you might want to subscribe by clicking here.

Advertisements
4 Comments leave one →
  1. November 28, 2008 11:04 pm

    Hi Soham,
    Great article! The old adage of when the best time to buy is when there’s blood in the streets and India is good example in the making. I also liked how you pointed out that wars take time to develop WITH the development of a bear market (i.e. social mood).

    I’d like to point out that you are incorrectly labeling the science of “socioeconomics.” I believe you are refering to Bob Prechter’s socionomic social mood theory. You can find the difference between the two sciences here: http://www.socionomics.net/whatis/

  2. November 28, 2008 11:23 pm

    Reminds me of Daniel Craig starrer Casino Royale….terrorists planning to make profit from the stock market crash that comes as an aftermath of the attack…even they refer to 9/11…

    My prayers for the souls of the brave dead ones and the suffers…

  3. Soham Das permalink*
    November 29, 2008 10:06 am

    Thanks Ben
    Rightly pointed out. I stand corrected.

    In my latest article in Seeking Alpha, I talked out in detail how, the retail has got visibly shaken by the October fall, and why strategic reasoning says, this is the best time to enter.

    Buying Fear and Selling Greed

    I honestly believe that plain old technical analysis with a bit of wide viewed vision to notice the underlying changes in the society can help lock in some of the best investments you can afford to have.

  4. Soham Das permalink*
    November 29, 2008 10:09 am

    Dear BB,

    Incidentally I saw the last part of the CR last night, reminded me of everything, from terrorists carnage in Mumbai streets to the bravado of James Bond when he single handedly fought terrorists in sharp contrast to our NSG commandoes.

    Ironical isn’t it?

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: