On Monday, May 18, the biggest financial news story was not the 200-plus point stock market surge on Wall Street. It was the 2,000-plus point surge on Dalal Street. To wit: India's main Sensex Index soared more than 17%, triggering circuit breakers and halting operations for two hours in that market's first-ever "upside shutdown."
Here's another number: .0001. That's the fraction of a second it took for the fundamental experts to pin the Sensex surge on India's Parliamentary election results. "India's stocks enjoy 'Congress Party Rally'," exclaimed one popular news source.
There's just one problem. The outcome of the election was public knowledge way before the official May 18 announcement. (See May 15 AP story: "Officials 'Twitter: 'Early Results Show Congress Party Is Leading.'") At best, the Congress Party's much-anticipated victory is a small part in a larger optimistic whole that has long since been underway.
Reality Check time: The most recent uptrend in the Bombay Stock Exchange got started on March 9, 2009 -- more than two months ago. At that time, the only "victory" the mainstream experts saw in India's financial future was that of a furious BEAR against a feeble Bull.
In the Grizzly's corner: A huge outflow of foreign investments, 10 million job cuts by Indian exporters, the emotional and structural devastation from the November 2008 Mumbai terrorist attacks, the worst corporate scandal in India's history (The $1 billion Satyam Computer Services fraud known as India's "ENRON") --- AND, a 70% plunge in the Sensex from its January 2008 high.
In the words of one March 6, 2009 news source: "Sensex Hits Three Year Low... There is a total lack of confidence in the market." (Business Live)
That's a sentiment with which the March 2009 Asian-Pacific Financial Forecast begged to differ. In that publication, Editor Mark Galasiewski set the stage for an across-the-board surge in Asian stocks and wrote:
"Most Asian Pacific indexes are midway through the fifth wave declines. Once those impulses are complete, prices should rally for at least several months."
Soon after, a major trend-accelerating developement occurred to warrant an immediate bullish case. In the March 23 Asian-Pacific Financial Forecast "Interim Report," Mark presented the following close-up of the Sensex Index and wrote: (Note: Some wave labels have been removed for this publication)
"Prices have just broken above a downtrend line, imitating a pattern from 2004 that led to a strong rally."
Now that the Sensex has regained 50% of its dramatic 2008 sell off, one question remains: Is the bull market back in India?