Sensex in a third wave catastrophic bear market led by inflation, oil price, credit crunch, Indian budget and trade deficit
Lata Ayer
Jun. 27, 2008

Sensex has lost more than 40% in less than nine months. The bubble burst in Indian equities market has initiated the worst bear market in Indian stock market history. Inflation, credit crunch and Indian budget as well as trade deficit are the root cause of the depth of the bear market. Add to that the skyrocketing oil price and you get the Indian equity market massive bear market.

The inflation, based on the wholesale price index, further rose to 11.42% for the week ended June 14 as against 11.05% the week before. The NYMEX crude oil meanwhile neared the $142-mark per barrel.

Today Sensex dropped again to a low of 13,760 at the fag end of the day - down 662 points from the previous close. The index finally ended with a hefty loss of 620 points (4.3%) at 13,802.

The Indian equity index has dropped more than 20% since May 16th of this year.

Stocks all across the board are getting hit. Most of the sectors are retreating in the bear market. The outlook in the next nine months is very gloomy. Inflation and the perception of inflation as a problem (rising interest rates) is the major enemy of any stock market.

Unfortunately Indian Government followed the same policies that central and South American countries followed in seventies and eighties creating massive inflation, weaker economies and increasing unemployment.

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