Bear market on the horizon? Deepak Shenoy weighs in on incoming ‘doomsday’

The Nifty 50 benchmark index has declined over 3% from its peak in a span of merely five trading sessions, coinciding with a notable surge in market volatility. This widespread selloff in the Indian stock market reflects a prevailing sentiment of caution among investors amid uncertainties surrounding the Lok Sabha elections and the Q4 earnings releases and sustained outflow of foreign capital.

Deepak Shenoy, the Founder of Capital Mind, believes this sharp correction gives a sense of impending doomsday. In a post on X, Shenoy said, “Markets are being markets. 3% off the top and it sounds like doomsday is here. It might well be, but I've hardly ever seen deep bear markets start when everyone thinks the end has come right at the beginning.”

Shenoy’s perspective can be seen as a reminder to investors that markets are volatile and unpredictable. He implies that deep bear markets rarely begin with a universal knowledge of an impending crash. It means that when everyone is bracing for the worst, it’s often not the beginning of a prolonged downturn but rather a temporary blip.

Indian stock market has seen a sharp bull rally as the benchmark Nifty 50 has jumped over 20% in the past one year and more than 36% in two years.

However, domestic equities have been experiencing strong bouts of volatility in recent sessions, weighed down by several global and local factors.

The recent correction in the domestic equities also comes on the back of sustained selling by foreign institutional investors (FII) as their total outflows exceeded ₹22,000 crore in May 2024. FIIs offloaded Indian equities worth ₹22,858 crore within the first six market sessions so far in May 2024.

Also Read: FIIs offload ₹22,858 crore in 6 sessions: VIX to hawkish Fed—5 key reasons causing bulk selling in Indian equities

FII selling intensified as Indian markets are underperforming, while those of China and Hong Kong are outperforming.

Earlier this week, market veteran Shankar Sharma highlighted that a threat was lurking beneath India’s bull market which he believed to be the single biggest threat - overcapitalization driven by the greed of merchant bankers and operators.

Read here: Some stocks will fall 90% in next bear market, warns Shankar Sharma

“Single biggest threat to this Bull Market are greedy Merchant Bankers & Operators, exhorting foolish promoters to raise excess capital, permanently destroying balance sheets via over capitalisation. I repeat: These are the stocks that will fall 90% in the next Bear market," Ace investor Shankar Sharma wrote in a post on X.

On Friday, the Indian stock market snapped a five day losing streak to trade higher amid short-covering and positive global market cues.

At 10:15 am, the Sensex was up  483.11 points, or 0.67%, at 72,887.28, while the Nifty 50 was trading 152.25 points, or 0.69%, higher at 22,109.75.

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