Markets have been cracking and in current scenarios there is not going to be much respite for next couple of months . In such a scenario lot of investors with cash in hand also would be feeling left out whereas the short traders minting money ! Above all the cash generated can only be deployed slowly at regular intervals and wait for further dips rather then buying all at one shot as its an investors market with lot of bargains which can get better by the day .
Meanwhile have received lot of queries regarding that we havent seen short calls on the blog. Well readers those who have been associated with us know that we are on the less aggressive side and dont recommend going for highly leveraged positions in FNO , Margin Trading or Options to a large extent. This discipline has kept all of us , readers, investors insulated from the january crack and also the use of stoplosses as well as reducing positions at right times whereas there have been lot of heartburns for the aggressive players . There is a saying " there are many bold traders , but not many old and bold traders" . So in the longer run discipline fetches more returns and keeps u safe !!! most important .
Most importantly what restricts an investor from trading on the short is the limted options and the restrictions on it. There are only two ways to short sell one is Futures contracts or cover the sell intra day ! . The derivative segment is restricted to the highly traded stocks. In mathematics 50 to 100 or vice versa 100 to 50 would mean similar moves in absolute values but an investor having a bearish view cannot build an accumulated position by selling at 100 then 95 then 105 etc as such a scenario is only for futures which would get highly leveraged . Intra day with gap downs is difficult to trade and cut it in the day itself implies exact timing for returns !
So what can a conservative player do in this scenario. The simplest thing to do is to EXIT /Generate cash and sit out on sidelines for opportunities and build a portfolio slowly for long term as its no more a quick jumping market like before. Currently all of us ( readers ) must have used the warnings/advice at 17500 /16800/16100 to generate cash /exit and now are slowly nibbling into investments at 14700-15300 and 13500-14100 to the extent of 35-60 % of cash ( as quite some stocks picked bounced 15-20 % and were advised to be reduced so cash levels should vary ) . Now the next lot of buying would be done once market stabilizes around 12500 or we will wait for markets to take a technical reversal in months to come and in between reduce stocks if they bounce sharply.
All throughout during this period i have been mentioning about crucial supports which if broken could lead to much more pain in certain stocks ... For example SBI at 1600 , BHEL 1700, ICICI below 860 , ONGC below 980 , DLF below 580, Unitech below 280 etc etc were mentioned to keep investors on a check for levels which if broken could lead to lot more pain. All these stocks have corrected to a large extent of 20-40 % so those who have exitted (aggressive traders could have shorted too 🙂 ) have already saved in 20-40 % of the portfolio crack possible and have the choices to make and start afresh .
While at the same time there are a certain set of investors who have not exitted at all and have stuck to losing positions and mistakes made earlier with hopes and no stops. For them they have to just go through this quote which i have been repeating for last so many weeks.
Some people say, "I can't sell that stock because I'd be taking a loss."If the stock is below the price you paid for it, selling doesn't give you a loss; you already have it.
Investors have to make a bold decision in such scenarios whether their risk profile suits the current allocation in the stocks or whether the stocks are worth it . If the investor is really long term and likes the portfolio or trims it down then he should have the guts to go out and buy more with a long term view when market dips to much lower levels and be ready with double the portfolio size and wait ! ..... As lot many people who got stuck at 21k index and are still not in cash either have to double the portfolio size by pouring in fresh cash ( high risk players only can do this ) as the portfolios would already be down by 50 % and dont expect markets to come back to 21k which would mean doubling for a fresh investor !! ( isnt it weird to be hoping that) ....
In short words , Investors who have generated cash and are now slowly deploying need not hurry . Waitout make your set of best picks , research them and wait for value levels and start buying slowly and be patient for next 6 mths to 1 yr as many stocks may further go down also in such scenarios and u may have bought it higher but if you are convinced of the business they will catch up sooner then the wrong ones ! And investors dont need to see the ticker and worry about the daily movements and those who are not so patient should ideally do nothing and wait for some weeks/months and come back when there is much more stability 🙂 ............ Its not necessary to trade everyday and not necessary to buy everything that is cheap !!
Take your time as markets would continue to give opportunities to invest ( we have not seen a 10 % upper filter ever 🙂 ) so is there any need to hurry or to latch on to bad stocks /debts ( u can always re enter lil higher but in comfort ) !
Regards,
Nooresh
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