Home > Market View > NIFTY rebounds sharply-Should one jump in and buy?

NIFTY rebounds sharply-Should one jump in and buy?

Wednesday, October 24, 2007 Leave a comment Go to comments

The markets as usual remain volatile. I feel we need to get used to such wild upswings and downswings. This market is definitely not behaving like the usual 2003-2007 market. This is more like the 1999-2000 market. As long as the markets remain in a long term uptrend(6 months+), sharp corrections within that uptrend present good buying opportunities for the longer term guys.

Short term guys are having nightmarish time. One goes long thinking that markets are going to go up and the next movement they turn down. One goes short thinking that markets shall go down further only to see the markets rebound sharply. So it might be all painted in red for a few short term players! Do you still want to “guess” the next move on NIFTY?

This is precisely the reason, I ask people to stay away.

Actually what happens during such huge intraday moves is that people feel the urge to jump in. The game looks so easy from outside and one thinks about generating 5-10% returns in day. And once you jump in and the market goes against you, then you turn to God to help you get out of this mess 🙂

Coming back to markets. The SEBI chief clarifications seems to have done wonders for the market. I feel more than the P-Notes people were more concerned about the “long term policy” on controlling capital flows. As of now SEBI has hinted that th move is more towards cleaning the system and ensuring transparency. As far as liquidity is concerned, it might take a small hit after Oct 25.

Anyways, no one questions the positive sentiment the market is witnessing on account of such moves!The short term trend is definitely up and the bulls might push the index further up. The rebound has been so fast that all the bears might not have found time to cover. At the same time the bears are not going to give up so easily. Bulls for sure have an upper hand as of now. The NIFTY might take a dash at 5700 if bulls have their way. 5100 remains a rock solid support on the downside.

Now what can you do as an investor in these maniac times?

If you are an aggressive trader and sitting on profits, there is no harm in riding this uptrend. This time situation is better because last week’s failed upmove has created lots of sceptics.

If you are a conservative trader then it is better to stay away from market. Better take the much needed holiday and hope that the markets shall be saner when you come back.

If you are a longer term player and didn’t buy anything on these sharp corrections, then this is a difficult period for you. You can buy small quantities of stocks if you feel comfortable with the risk. Just keep this in mind-this uptrend can result in 6000+ on NIFTY or a 5000- move.

In nutshell, it all depends on your risk return profile. If you are a 15-20% per annum kind of investor, you might stay away. If you are a 50%+ kind of investor, you might jump in now as you might have already crossed 50%+ return for the year and might be willing to take more risk.

So find out out who you are and devise an appropriate strategy.

Good luck !

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Categories: Market View
  1. sagecapital
    Thursday, October 25, 2007 at 8:43 am

    Rey-Can you please post the relevant link?

  2. ReyMax
    Wednesday, October 24, 2007 at 11:24 pm

    Again a word of caution.

    I read that some $20 billion of fii fund flow is waiting on the sides to get in. Why are they waiting? Why dont they get in?

    Do they know something we dont?

    Must keep positions hedged by BUYING ‘out of money’ puts even as you harvest this bullish trend.

    cheers and hope the whole lot of you is cheerful on friday as well.

  3. sagecapital
    Wednesday, October 24, 2007 at 10:16 pm

    I hope this correction doesn’t mean that the stock goes back to 600 before it recovers! Lets keep our fingers crossed.

  4. Srinivas
    Wednesday, October 24, 2007 at 10:13 pm

    Hi Seema, I am pasting the following information that I got from one of the reputed broking sites. Hope, this would satisfy your query.

    “RIIL has been hitting lower circuit since yesterday, after hitting upper circuit for over a month. This fall is seen as a technical correction which would see the stock resuming secong leg of the rally. This may happen in the next week.”

  5. sagecapital
    Wednesday, October 24, 2007 at 11:56 am

    They had gone into “spam” folder by mistake. My real apologies!
    Regarding your question- I follow “price trends” rather than “reasons”, so I might have absolutely no idea on the reason for RIIL’s upmove.

  6. Seema
    Wednesday, October 24, 2007 at 11:51 am

    Why you have not displayed my response on your site???

  7. Navs
    Wednesday, October 24, 2007 at 11:24 am

    Yes, I warned about the VIX related risks that the market is providing. Particularly retail investors are bearing the brunt.

    As sage rightly points out, if you are a 15% genre of investor, better to stay away until the volatility subsides.

  8. Seema
    Wednesday, October 24, 2007 at 10:32 am

    Does that mean that you have no charts or no idea about the reason for such major moves that the stock is in UC for 1 month. Surprising !!!

  9. sagecapital
    Wednesday, October 24, 2007 at 10:12 am

    The idea was to covey you the “risk” associated with such stocks. It is like 0 or 100 with such stocks. So if you are ready for a 0 in pursuit of 100, you can very well plunge in!

  10. Seema
    Wednesday, October 24, 2007 at 9:49 am

    Thanks Sage

    I am not asking about your liking 🙂
    It was just a question to a wise person who has understanding of market.

    In case you can suggest something its okay else good luck

    Thanks

  11. sagecapital
    Wednesday, October 24, 2007 at 9:41 am

    I don’t like stocks which are into this UC and LC business.They only look good on charts!
    Better stick to large cap and liquid stocks. Even a stock like BHEL gave a 10%+ move yesterday.

  12. Seema
    Wednesday, October 24, 2007 at 9:39 am

    Hi Sage..need your expert advice. RIIL (Reliance Industrial Infra Limited) has been hitting UC expect yesterday. What do you suggest about investing in this stock?

    Thanks
    Seema

  13. sagecapital
    Wednesday, October 24, 2007 at 9:00 am

    Profit booking at every opportunity? What does it mean? Going by that, you might be out of market today as there was definitely an opportunity to book profits yesterday!
    What makes you feel that “One may not find more opportunate movement even in lifetime”?
    Are you suggesting that if one “misses” this up move one might never get an entry again at these price levels?
    I feel a little confused 🙂

  14. Wednesday, October 24, 2007 at 8:52 am

    I think there is absolutely no harm in riding the tide with profit booking at every opportunity. The trick is to devise an investment strategy according to risk appetite. One may not find more opportunate movement even in lifetime.

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