Should one buy the dips?
The market is trying to stabilize at lower levels but every rise is met with fresh selling. Definitely fear is ruling our markets!
So should one act brave and buy this fear? Ask the brave guys who bought a JP associates while it was falling down!
I’d buy the fear but only in small quantity. There is a very high risk of this market testing lower levels. Even if you don’t buy now, you will only miss “a few opportunities” but you might end up saving a lot of money.
Just as no price is “high enough” for stock prices, similarly no price is “low enough”.
The world is going through turbulent times and the US consumer which formed the central engine of US and global growth is under a lot of stress. Major banks like Citi are still facing possibility of huge writedowns (till date $180 billion+ has been written off in the banking system) and there are big question marks on its survival.
The world doesn’t end in a recession but stock prices do stumble a lot in recessionary times.
You might have to reconsider your “equity exposure” in the short term. I might be wrong but the price trends tell me that we are still headed down.
So this might be a time to change your strategy -like resort more to short term trading and avoiding heavy leverages. Try trading Mini NIFTY futures in small quantity which allows you to take directional bets on both sides.
I feel the best strategy is to play like a boxer who is just staying away from his opponent and placing high frequency jabs from a distance. Getting near is too risky!
Akshay-You are right. You have to go against the crowds.
Valuation wise we might be 5-10% away from the bottom but it is difficult to say where the value will finally emerge-15 PE or 10 PE.
Right now-people seem to be more worried about “operational risk” of the companies rather than the “price risk”.
People are not too sure as how much forex or credit derivative losses Indian companies will take.One wrong move and we are talking of huge huge losses.So after many many quarters there is big question mark on “earnings” of many companies. Thats why people are not willing to believe if many of these companies are actually good!
It actually depends on what you buy. I have always been lucky to buy at market lows – stocks with strong fundamentals and available cheap, for some quixotic reasons. There are still very few in the market, no doubt there will be more in future. The market is still overpriced.
I did not buy anything, when market crossed 10K for first time (for somebody, who has bought in 2001-2002 period, this was very high) and have started buying since yesterday only.
Yes, I had sold out when the market started crossing 15K in the past. It hit 22K. Several of my stocks had appreciated, beyond my imagination. But, I had moved all of my money to FDs and liquid funds, since last year or so.
Right now, there are few buyers. When fear rules, people with tough hearts accumulate.
The last time, I kept buying was in 2001. I was so scared, because my investments were almost completely in equity (95%) – because my broker always advised against it.
Right now, I am primarily in debt funds (90%) and have started moving over to equity. Let us see how it pans out this time around.
If a company trades at low P/E multiples, has shown good growth, has good management and other than stock market, there are no downside risks – BUY.
Because most people are waiting on sidelines.
Rightly said Sage. I have seen, excessive trading burns our fingers — as has been said earlier — too much of anything is bad for health —
Roy- I never talk about options on the blog. With options you can take “any view” on the market-up/down/sideways but thats not the purpose of the blog.That might make things too complicated!
You don’t have to make money every month or every day .You can make it in 3-4 months and then sit tight till favourable conditions emerge again.
Dear Sage, we are talking about making money in stocks…i am sure earlier you were not making money ony in cash delivery… there is something called Call/ Put… if you are not clear i can teach u in this testing times..u can sell call and buy puts
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In India shorting of equities is not allowed! So I don’t give ideas on the short side.You can call it long bias.
Of course-one can short in stock futures!
Hi Sage, few months back you used to give lectures how you make money by riding the trends and see now your website is not even refresehed for weeks. Every one can give buy / Sell calls in bull phase (even a layman) and the expertise lies in reading and riding and ofcourse making money by shorting current phase of money. Cheers !!!
Yep- As I don’t catch falling knives,I stay away..
I am not intelligent enough to catch the bottoms!
Long term “buys” are a big NO. We don’t buy stocks that are falling thick and fast.
This looks like a dead blog now.
Sage, are you sending any buy recommendations to your customers now-a-days or you are going by cash-is-the-king idiom?
Long time no see…
Yohoo sage
You take off on vacation every time mkt falls!
Good indicator!
cheers
SAge- YOU ENTERING AT THese levels???
Anupam- My constraint is that I can’t see 3 years into the future!
Of course if you are a good fundamental guy and can pick great stocks,then you might use the downside volatility to your advantage.
Being a trend trader, I am not allowed to catch falling knives!I have been hurt more than once following that strategy. So I shall just trade the moves rather than doing a 3-5 years “buy n hold”.
While its true, dont you think this could be about the time ( 4800 whereabouts) to accumulate the multibaggers, even if it takes 3 years to be so. You dont get 2* in 3 years anywhere except equity markets. And India being high beta, one can get a 3-4 time return as well. Nodoubt one might see a 10%erosion in his capital over the next 2-3 months. Levels of few good stocks are at interesting areas.
Even I do automated systems but the volatility and gap-ups/gap-downs are just killing my long term systems.
Short term stuff is working out quite well.
You could be right there but anytime you are in the market is a risky time. You just need to be clever and think more before you act. To be honest I do not do my thinking for me. A special robot does. It does the work for me so I don’t have to. You should check him out by clicking on my name. You would be crazy not to use him during these times. Anyway keep up the good work and lets play the markets Ali style.