Ramesh Damani deserves to be applauded. He is a man of scruples. His conscience is in the right place. And he is not afraid of saying “Sorry, I got it wrong this time.”
He has always been saying that this is a bear rally and that it has no more legs to stand and will collapse soon. In an interview given to CNBC TV 18 on 31st March 2009, he had confidently predicted a bottom of 8,000 on the sensex and stated:
Q: What have you made of the last few weeks, where we have had a fairly spectacular and sharp 25% rally?
A: The bad news, of course, is that, it is a bear market rally. The good news is that you can view the market from many prisms; you can view it from earnings, expectations and de-coupling theory. However, if you view it purely from the angle of sentiment, I have never seen the bears more confident in the 25 years that I have been watching the markets. The way they are talking is like Armageddon-2 is going to happen and it is going to happen tomorrow. The market is obliged in that direction. Thus, if I have to make a call, I will say that the market is not going to go back to the bottom of this trading range in a hurry. It is going to spend some time at the higher end of the trading range, maybe even take out 10,500. I just think the confidence in the bears is so supreme that the market will test them also.
Q: So where do you see upsides capped for 2009? What is that point at which the bears start throwing in the towel and say maybe things are changing, and we should not be so complacent about the downside risk in the market, and the point where the bulls start saying that things have turned once again for the mend? Is it 10,000, 11,000 or 12,000, what is the upper limit in your eyes?
A: A few months ago, I would have said 10,500. That was the day the Satyam debacle broke. It was around 10,500. My sense is that the market will take it out and go up to say between a broadband of about 11,500-12,500. If you remember, 12,700 represents the peak it reached in May 2006, before the market had one of those most ferocious bull market falls. So, I would say 12,700, or spikes around that region, would be the higher end of the range. It may never get there. But if it crossed 12,700 in a very decisive manner, you would certainly have to look and say that maybe your analysis needs to be rethought out.
A lot of people, including yours truly, took Ramesh Damani’s word to heart and sold a large number of shares in anticipation that there would be a great crash and that there would be a great opportunity to buy back those very shares at a steep discount.
The Reality? The opposite happened.
History was made on the stock markets on Monday, the 18th May 2009. Immediately on opening, the Sensex surged 1,305 points and touched 13,479. This triggered the circuit breaker and trading was halted till 11.55a.m.
Trading was resumed at 11:55 am after the 2 hour break but a further jump and the breaching of the 20% circuit breaker meant that trading was haled for the day. In all, the sensex gained 2099 points and touched 14,479.
The Nifty also breached the upper limit of 20 percent within a few seconds of opening forcing trading to be halted and closure of the markets. The NSE showed a jump of 17.33 percent in the day rising by a phenomenal 636 points. It closed at 4308.
If anybody had gone short following Ramesh Damani’s advice, he would be BANKRUPT!
Of course, that’s part of trading in the stock market – you take the risks as well as the gains. One really can’t blame Ramesh Damani – or any other analyst who predicted the same dire outcome – for the losses suffered.
To Ramesh Damani’s credit, he clearly acknowleged that he had made a mistake of judgement. In a chat interview published on moneycontrol.com on 19th May, Damani candidly admitted:
sandeeparora9: Dear Ramesh now since sensex is trading above 12700, what is ur view now do u still feel its a strong bear mkt rally and we will test the bottom again or a new bull run has started?
Ramesh Damani: like i said if it crosses 12,700 (and it has decisively), its best for me to take a break from market forecasts
vishnukant_1: Dear Sir,we are burnt badly enough by not buying at the level of 10000, on the index. Sir,u also say,stocks can outperform dramatically from the levels of 14000. If u do see any stock performing , dramatically specially Bank stocks as u say, they are HOT or Bank Nifty if a clear trend of up is there,do share with us.Or should we wait yet for more events to dictate us, what to do.This time we do need a clear view call from u, Sir. We r patiently waiting.
Ramesh Damani: respectfully, i have not seen the market well since March 9th..so let me get my bearings straight
sareen_1976: sir, new higher water mark for sensex as 12700 is already crossed.
Ramesh Damani: yes it has..it was a poor call.
While Damani was decent enough to admit that he had made a poor call, the same cannot be said for all the other dooms day sayers like Shankar Sharma and Devina Mehra who, like Damani, had also predicted a dire future for the market. Shankar Sharma was at his chameleonic best, doing a somersault that could rival any gymnast: “See 40% upside in 2-3 months” he screamed from the rooftops, conveniently forgetting that just a few days ago, he had predicted that bottom would fall out of the market. He should have been a politician, this man! He’ll make more money there than as an analyst.