Have you even tried predicting the imminent arrival of rains? How did you do it? The smell of rains is an obvious signal that actually told you the rains are near. And, mostly, the rains seldom disappointed. The markets have a smell of their own. Do you have a nose for the markets? Many veterans actually do. They know when the markets will rise and will perceptively tell you when they feel it is imminent. The smell of a market rise also comes from a few strong signals-abysmal sentiment, very high redemptions in mutual fund by retail investors, absolutely little inflows into equity schemes, almost all mutual fund inflows going into debt funds, very high prices of competing asset classes like real estate and gold. On a weekend when almost all of these signals are abundantly in evidence, one only needs to try and perceive things right. Stock markets always follow one golden rule. “When things can’t get any worse, they definitely get better”. As if to reinforce the return of the stock markets, even the monsoon rains have made a strong comeback.
Investment aversion and objectivity are mutually exclusive.
Investors have been holding higher levels of cash hoping to get a sharp dip in the markets. The much awaited dip seems to have eluded them as the indices rose by 18% from the previous bottom. That brings us to a point where one must take fresh cash call. Should we deploy money or continue to wait for a fall? Or, should we stop waiting and simply deploy money? The markets have absorbed every kind of bad news indicating that liquidity flows into equity will be steady. Further, any good news will be lapped up quickly and lead to a rise in markets. Holding high levels of cash will not work and investors must selectively deploy money into equities.
Make your portfolio sharply focused and well allocated.