Well, this is the question many of my friends are struggling with. My take on the same is that Come January 15, and you will have more clarity on whether we are done with the bottom or still pain is to come. Lets analyze few facts to come to any conclusion.
Facts
1- In anticipation of Redemption pressure due to festive season, most global and Indian funds managers are sitting on hefty cash. Almost 2-3 times than they usually did in past few years.
2- This is year end going on and most hedge funds have to close their books by this time. So, we used to see a selling in X-mas week.
3- New market outlooks to come out in January for many global funds waiting to deploy money.
A Little Analysis
My take is hedge funds already have oversold, so the second point goes out of contention for year 2008. This said, December last week, being festive season, you may see slight dip in sensex, but no major bounce expected. Conclusion, we may see a lethargic, soporific markets for the year end. And that's logical also. You don't want to go in festive season with lot of open positions. So be light, book profits if you have any and enjoy new year is my suggestions.
If you have bought stocks in last dip of October, you can stay in it until market comes below 3000 for closing. If it does, we are in for a trouble. Also, if you get something 3200+ on nifty, please exit and book profits.
Then comes, when to invest. Well, wait until January end or preferably February first week. Global picture would be clear by then. And a possible dip (to allow these cash rich, underweight on equity fund managers worldwide to deploy cash at lower levels) would have occurred by then, if at all that has to come. '
Even otherwise, my take is that one should be happy compromising with less profits than to make losses in markets. Because, markets have already gone up by about 30% (700 points from 2500 nifty level). And by any imaginations, global issues of recession are not out of sight.
There is popular philosophy which says, equity markets bottoms out 6 months before economy. So that means, economies worldwide are to see more pain in fiscal 2009-10 than they did this year. So, in 2009, no investing please. Whenever you make 20-30% profits, get out. Markets will be kind to give you another entry which may be slightly higher than your previous entry, but now, you have more money as that money has already given 20-30% returns.
Now an Indian view point on why markets are likely to see a dip in January last week or Feb first week. In India, most of savings happen in the month of December to January making these fund managers more cash rich. And these guys are no fools. They know value of investing cheap and that is what strengthens my belief that markets must give a dip in Jan end or Feb beginning. How much is tough to say. But, this may no breach October lows (2500 nifty). If it does, wait some more and invest full capital when markets his 2200-2300 sort of level. If it does not, well, you are already deploying money in small quantum. How?? Say, 20% at 2850 level, 20% at 2700 level and wait to see market movement. If stays there or moves up, invest full, else wait for 60% investment in 2200 sort of levels. This paragraph is just an indication on how you can go about your investment, you can make any other combination as well which suits you.
I assume, Indian investor has learned over past period and will be investing his money (at least ULIP investments) in Protector/Preserver type schemes than investing in Maximiser/Multiplier type of options This is time to protect your capital. You can later switch to wealth maximisation. So, please invest in schemes which allows option to switch from protector to maximiser type of funds.
In my next post, I will explore some good sectors for next (and perhaps last of Indian equity markets) secular bull run in India.
Disclaimer: The above is just my personalview and any decision takenon the basis of above will be individual's choice and I will in no circumstance hold any responsibility for any situation arising out of this.
Facts
1- In anticipation of Redemption pressure due to festive season, most global and Indian funds managers are sitting on hefty cash. Almost 2-3 times than they usually did in past few years.
2- This is year end going on and most hedge funds have to close their books by this time. So, we used to see a selling in X-mas week.
3- New market outlooks to come out in January for many global funds waiting to deploy money.
A Little Analysis
My take is hedge funds already have oversold, so the second point goes out of contention for year 2008. This said, December last week, being festive season, you may see slight dip in sensex, but no major bounce expected. Conclusion, we may see a lethargic, soporific markets for the year end. And that's logical also. You don't want to go in festive season with lot of open positions. So be light, book profits if you have any and enjoy new year is my suggestions.
If you have bought stocks in last dip of October, you can stay in it until market comes below 3000 for closing. If it does, we are in for a trouble. Also, if you get something 3200+ on nifty, please exit and book profits.
Then comes, when to invest. Well, wait until January end or preferably February first week. Global picture would be clear by then. And a possible dip (to allow these cash rich, underweight on equity fund managers worldwide to deploy cash at lower levels) would have occurred by then, if at all that has to come. '
Even otherwise, my take is that one should be happy compromising with less profits than to make losses in markets. Because, markets have already gone up by about 30% (700 points from 2500 nifty level). And by any imaginations, global issues of recession are not out of sight.
There is popular philosophy which says, equity markets bottoms out 6 months before economy. So that means, economies worldwide are to see more pain in fiscal 2009-10 than they did this year. So, in 2009, no investing please. Whenever you make 20-30% profits, get out. Markets will be kind to give you another entry which may be slightly higher than your previous entry, but now, you have more money as that money has already given 20-30% returns.
Now an Indian view point on why markets are likely to see a dip in January last week or Feb first week. In India, most of savings happen in the month of December to January making these fund managers more cash rich. And these guys are no fools. They know value of investing cheap and that is what strengthens my belief that markets must give a dip in Jan end or Feb beginning. How much is tough to say. But, this may no breach October lows (2500 nifty). If it does, wait some more and invest full capital when markets his 2200-2300 sort of level. If it does not, well, you are already deploying money in small quantum. How?? Say, 20% at 2850 level, 20% at 2700 level and wait to see market movement. If stays there or moves up, invest full, else wait for 60% investment in 2200 sort of levels. This paragraph is just an indication on how you can go about your investment, you can make any other combination as well which suits you.
I assume, Indian investor has learned over past period and will be investing his money (at least ULIP investments) in Protector/Preserver type schemes than investing in Maximiser/Multiplier type of options This is time to protect your capital. You can later switch to wealth maximisation. So, please invest in schemes which allows option to switch from protector to maximiser type of funds.
In my next post, I will explore some good sectors for next (and perhaps last of Indian equity markets) secular bull run in India.
Disclaimer: The above is just my personalview and any decision takenon the basis of above will be individual's choice and I will in no circumstance hold any responsibility for any situation arising out of this.
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