Home > Market View, NIFTY Strategy > Bulls still in control

Bulls still in control

Wednesday, August 26, 2009 Leave a comment Go to comments

The markets remained stable as bulls managed to pull it from behind and close it in the green. 4650-4700 is level which offers great resistance to the bulls. A lot of short term tradeers will be booking profits as well as some of the bears will short this market around these levels. So some selling pressure is expected in the short term. Also the derivatives expiry will bring in added volatility.

So far the bulls have played the game to perfection and might try to take this market past the 4700 level. The bears are hoping for some bad news on the global front!

Although the indices were flat today, individual scrips were running hard. Aptech and Tata Motors are two stocks I have mentioned before on the blog, were up significantly. HCL , KPIT Cummins and Ranbaxy(mentioned in my tweets) were some of the other stocks that caught fancy of the traders today.

( On a side note- Twitter is a great way to communicate. Reading such big posts might be painful for some readers )

The rally in IT stocks might be confusing for the fundamental guys as the IT fundamentals are still to improve. The situation on the ground is still not that rosy but all these moves are happening in anticipation of better times!  The funny part is that when the earnings actually improve the stocks would have already moved up so much, the stocks would be punished for failing to meet expectations. As a result the guy who bought the stock on good numbers will end up losing.

Who wants to still argue that markets are rational?

The market has discounted bad monsoon, Swine flue and every other negative news to march forward. As a result lot of investors (read FIIs) who have been left behind in this game and are playing the catch up now.

In a way this rally is reminding me of second half of 2007 when we had the great bull run in Indian markets. Will history repeat itself ? That is a big question and cannot be answered with certainity. Although the signs I am getting are looking very positive but still I’d keep my enthusiasm in check. My gut feeling is that although we might move up but the upmove won’t be very neat.

As an individual investor, my job is to protect my capital rather than get carried away with any euphoria. I see that euphoria building in some of the IT stocks and I would advice serious investors to either trim their postions or tighten their stop losses. Get out at the first hint of trouble. An Aptech can’t move 17% everyday for too long. At some point of time, the risks outweigh the rewards! Our job in the markets is not to feel excited by such moves but make money out of these moves.

I would look for oil sector stocks as crude is already hitting $75. I had written sometime back that I expect a slow uptrend in crude oil to resume.

Finally a word for people who invested in 2007 and are still waiting for stock prices to come back to their buying price. Bad news for you- this might never happen for many of your stocks. Do you actually expect Unitech to be back at 550? The stock is not able to cross even 100 and to expect it to rise 5.5 times in a quick time might be too much. It might if we quickly get another real estate bubble in the country!

So you have a choice- either take the short term pain and cut your losers or just sleep over your losers and suffer the long term pain of losing a lot of money.

I can give you several examples of stocks from the last bull run who are getting closer to their 2007 price while there are many others who continue to be down more than 50% from their 2007 peak. And remember when a stock is down 50%, it has to gain 100%  to reach that old level.

So enough of Dhoni style batting, let’s play some solid defence like Dravid.

  1. Srinivas
    Saturday, August 29, 2009 at 6:15 am

    Hello Sachin, Good to see you back . I am also one of those who have been stuck in the 2007-08 bubble. Tell me how do I access your Tweets. It just the same caption coming in there too or it is very detail there in tweeter.

    • sagecapital
      Saturday, August 29, 2009 at 8:41 pm

      Just subscribe to my tweets by opening a twitter account. You can also receive these messages/tweets on your mobile as SMS. The content you see on the blog is the same as in twitter. Although there is a slight delay in updation on the blog.

  2. mahi
    Wednesday, August 26, 2009 at 4:15 pm

    realy good one.indirectly telling ,becareful while buying at this stage of market.
    only book profits. don’t do day dreeming.

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