Back above 5000 – where are we headed?

Would you be surprised if the markets touch 6000 and make an attempt at previous high in next 2-3 months? If you would be, then be ready for that surprise.

Would you be surprised if markets head back to 4300 in next 2-3 months?

The markets are at a point where they are poised to give big moves. If you ask which way- I’d say that 70% probability is on the upside while 30% is on the downside. So it makes sense to play for the bulls while covering your risks.

My prime reasons for beign bullish- I see a healthy scepticism about this rally. Most of the TV guys are still taking about a range or a negative bias. The historical trends (Oct-Jan) are in bulls’ favour. And the biggest of them all – the fall of dollar might bring in loads of money into the Indian markets. As rupee is in a clear uptrend against the dollar, I see rupee touching the levels of 43-44 in next 2-3 months. ( And RBI will allow that to happen!)

As an FII, you get the double advantage of equity gains plus the currency(rupee) appreciation.

This doesn’t mean that markets will go up in a straight line- we will witness some minor sell offs in between. I am keeping a close eye on the risks and there are couple of them which can change the game in next couple of months.

As far as stocks/sectors are concerned, my guess is that most of the good companies will participate in the upsides. At the same time, the bad ones will fall more during corrections. This might provide you with a good opportunity to reshuffle your portfolio and get out of the bad apples.

And as I always say, if you only look at rewards without looking at risks, you might again feel trapped by bulls in this rally. You’d be making a big mistake by filling your portfolio with junk small cap stocks just because they are making these wild moves in the short term. Just in case, you plan to trade them, then plan your exits in these.