The journey from bear markets to bull markets is often short and swift. When markets move from one phase to another, they give very little time for investors to react. Investors often come on board very late for this very reason. Now is clearly not the time to think of buying. So, what should investors who missed out be doing? For one thing, investors can prepare themselves to sell.
Most investors have existing portfolios which have not performed for the past two years and are showing signs of reviving with the overall recovery. The best thing to do would be to carefully evaluate every holding and judge their investment worthiness in the current context. Investors should sell out of non-performers and go into cash in a phased manner with every rise in the market. Now, it is when you sell that counts.
FII’s have bought for Rs.21,082 Crores in 2012. The buying has come from ETF’s and sovereign wealth funds among others. This changed many things dramatically. A weak rupee hardened swiftly. The indices reversed sharply. Importantly, the bull operators are back with a bang. The sharp jump in pivotal scrips in single trading sessions is clearly showing strong operator presence.
The stop losses are all getting triggered and day traders who have been short selling must have taken a clobbering this week. Counters like IDFC, BHEL and TATA motors have clearly cleaned the shorts out.
What will happen going forward? Usually, short selling day traders reverse direction and start going long hoping to follow the operators to make money. In the end, the operators dump their holdings on them and even go short on them. The stage then gets set for a market correction. Sounds familiar, Right?