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VK Sharma of Anagram Stock Broking said," We are in a confirmed bear market. The Street will get a confirmation, if we close below the level of 16,000 today. In case that happens, it will violate a trendline that has been in place on the monthly charts. We have never seen a closure, even on a daily basis, on that monthly chart. In case we see that, then question marks will be placed on the five-year rally that has been in place. He feels investors should panic and exit at these levels."

Excerpts from CNBC-TV18’s exclusive interview with VK Sharma:

Q: How do you expect trade to reopen at 12:30 pm, given that inflation has come in higher than what the street was expecting?

A: The markets will again take a hit as soon as they reopen. We could go on to make a new low for the day. But that is not important. We could look at a bear market with around 20% correction. That is the way the world is looking at things right now. From the level of 21,206 to a low of 15,332 on the Sensex, there is a correction of 27.5% already in place.

But we had a 32% correction in 2004 and have had a 30% correction in 2006. Those lasted for four months and two months respectively. In terms of time, we will need to bear out for another three months or so. We are in a confirmed bear market. The Street will get a confirmation, if we close below the level of 16,000 today. In case that happens, it will violate a trendline that has been in place on the monthly charts. We have never seen a closure, even on a daily basis, on that monthly chart. In case we see that, then question marks will be placed on the five-year rally that has been in place.

Q: Normally, when something like this happens globally, what we see in the US is that the regulator steps in, the Fed steps in, and makes money much easier and some of the money flows back largely into emerging markets. Could that happen and maybe we will get out of it?

A: I think people here have not panicked at all. Whatever panic we have seen has happened in two places. One where people held derivative positions and second were people held borrowed positions in terms of position trades. They have panicked. We have not seen panic selling from people who have built long-term portfolios. We have not seen mutual fund managers panicking. If I were to just take a small gauge, a large percentage of these young fund managers do not have experience on their side. They have not seen a bear market.

Q: So, are you saying that the confidence is misplaced and that they should be panicking?

A: They should be panicking. In this market, if you panic early the better it is. What is Ben Bernanke suggesting? He is suggesting that banks should provide on their own without asking for reduced interest rates. The malady is that you have to allow housing prices to fall. If you keep supporting that by reducing interest rates, the rising inflation that is there in place will kill you. So, that is my take.

Source: Moneycontrol.com