King of good times!!!

Sunny days are here again (quite literally)!!! Sorry have not been able to post many articles as I was out of the country on annual vacation. But what has happened in the markets have left me spell bound :) . Its fantastic to see such good growth in prices and price appreciation. Such moves actually help everyone wherein no one has to lost (except perhaps the people who had shorted!!!). What the magical Monday has done is that it has with one shifted the tide from being cautiously optimistic to plain simple euphoric!!!

I had written in my article on March 10th on how it is the absolutely correct time for long term portfolio building :) http://www.niftydaily.com/2009/03/time-for-some-long-term-buying.html

I hope some of the people might have benefited from it. For me personally I have been able to make a small portfolio for myself too, and lets see how does it fare! So far so good. Got 2 baggers in it, waiting for the 3rd bagger now ;)

Now where do we go from here. Well it seems that the tide has turned, the clock has ticked. . .but is it time to buy out recklessly, I dont think so. . .there are now many stocks that have started to trade way beyond their fundamentals. E.g. trading at 30 times the earnings reminds me of the scenario wherein 21,000 was reached. My philosophy is clear on this count, look around if you feel that something is at a throw away price pick it, even though the markets might be going down, for e.g. some of the stocks saw their bottoms in October lows, although the markets made their final bottom in March, those stocks never touched their October lows again, and perhaps will never do so !!! Similarly it applies conversely also. When you look around and dont find any stock cheap then its time to be in cash and sit around. Just imagine a person who would have missed out the investing bus in 2005, would have got the same levels of the markets in 2009 march. Hence in these 4 years had the person even kept his money in FD he would have made a cool 50% and then again could have been back to investing in 2009, I guess to double his money in 2 months!!! Hence the point is that invest when you are very comfortable with the valuations and obviously a buy or a sell signal can always be checked or confirmed with technical analysis.

Markets heading upwards?

Now with the rally in place and most of the people already forgetting the lows of March and October, things have started to look better. People are no longer talking about the markets heading lower, everyone is now talking about the recovery and how market might cross 3500 & possibly 4000. Well with due respect to all most people had started to talk about 2500 and then 2000 for the nifty when the markets were heading lower. The fact is that it is practically impossible to predict the markets when they are not in a trend shift phase. The trend shifting phase happened when the markets crossed 2800-2900 it was an easier call to take then that the markets would be seeing some good upmoves.

So where do we go from here? Currently we are in an uptrend, however the force of the uptrend has been diminished. We will remain in this uptrend until we go down below 3100. . .

A couple of pointers from my side why one should have some cash in hand.

1) There are down days when the markets have almost given up on most of the stocks, and stocks are available at crazy down valuations. These are the days when one employs the cash the return can be almost 100% within a very small period of time.

2) Indian election results, are a big factor that markets are awaiting. No one knows how the markets will behave after that. We all know that markets dont like instability.

3) Some stocks in the course of recovery have far outshot the correct price that they should command specially considering that the results are not expected to be great. Hence fair value is important.

4) Markets usually do not end the bear market in a V shape recovery. This is exactly what is happening, whereas actual results on the ground are getting worse!

So I think having some cash is the order of the day. If one is invested in the market then its nice to enjoy the upmove, with some stop losses in place. Its nice to take some profit off the table once in a while. Wait for the off days and if the markets change course again then wait for the real off days to enter the markets to gain some multi baggers. . .