The Sensex after touching 23000 mark has now breached 13000 level closing below 12000 mark. Usually, the share market experts, or that’s the way some people would like them to be believed, believe in predicting the markets on the lines of movement in the markets. These very pundits believed markets to cross 30000 mark when the sensex was at its peak.

I had contrarion view at that time. Only one thing that can move index northwards is the growth in supply industry. Rest everything follows it.

Experts may blame on weak currency, global cues, instable government or on just anything else. Just think for a while and every thing zeros on to the growth in real industry.

Is there a growth in industry that could fuel boom, or, let me ask, has there been growth in real industry in past 15 years or so? The markets may have zoomed on to new heights but lets see the growth.

China has virtually killed the goods industry world over. Today, for toys, electronics, furniture, clothing, every where you see Chinese products. In India, only industry that has grown is the IT industry and that too has grown because China could not match the expertise, may be because of poor knowledge of English. As this gap too is narrowing down, even this sector could face music in next 5 years or so. If you talk of housing boom or real estate or say telecom sectors - mind it these are consumption sectors and not industry. These sectors are supposed to flourish when there is generation of income elsewhere. The few sectors that have zoomed are petrochemicals, pharma sector etc.

However, despite the slackness in growth in goods industry, realty sector boomed because of inflow of funds from abroad, sudden zoom in salaries level in private sector and inflow of foreign money in share market that led to sudden zooming of the market.

As the things stand today, the sensex is touching 12000 levels. In today’s date a small spark is required to trigger fall of 1000 points. Of course, short covering, speculation does causes markets to recover after 4- 5 days, but would the real spurt in sensex come in near term markets?

Government is yet to face trust vote and mixed signals that are coming are bound to make markets unstable. Global cues too are not positive. FIIs are withdrawing money from the system. Industry is not showing healthy rate of growth. Whole nation is reeling under high inflation and rate of interest is moving northwards. Even if the Government survives, another round of polls is round the corner with again no solution to the inherently unstable government that our system gives us. Dollar is moving up and this would help only IT industry and export Industries(Are there any or say many?)

In this scenario, which factor would pull the sensex out of woods and drive the market? Even if the Government survives, it would be minority government, which would be open to manipulation by small parties lending their support. Next round of polls are likely to be held in or around May at the most which means, next budget would be vote-on-account. These proposals would be very mild and not bold. Final budget would be sometime in the month of June 09.

With Sensex at sub 13000 levels, all it takes is about 7 net sessions of continuous loss. In today’s scenario that is not something impossible. Even if sensex recovers marginally, which share pundits call “correction” every 4th day of trading, the sensex may lose 2000 points in next 6 -8 weeks. All it is looking for this much fall is a small excuse, which the government any time is ready to  give.

The fall of sensex, or even its touching 11000 levels, is bound to send horror signals to investors and further fall would be much quicker till at least 10000 levels. Therefore for all this fall of about 3000 points, just a fall of 2000 points is needed – rest would be in days.

Not convinced? We have a parallel in history. Today share index in Japan is about 40% of its peak levels about 3 years ago and people have learned to live with it.

The recovery in the sensex based on fundamentals appears on hold till new government swears in. Fence sitters are not expected to be in markets for so long. More than reovery in sensex, what appears more imminent is the sensex touching 10000 levels and “share market experts” predicting its recovery to 10500 levels.

I would wish not but appears we are fast heading for it.