What a salute to the Congress and the UPA win in the General Elections !
Sensex saluted with a straight Upper Circuit 10.73% surge on opening…It’s just a shade below 13500….The Nifty had done even better…hitting the second upper circuit of 15% on opening and is over 4200….Markets are to reopen at 11.55 am
I must concede that the chances of a Sub 10000 Sensex level again have receded considerably…but caution must be exercised in this crazy but totally expected bull opening….Let the Shorts cover…Don’t buy in unless you see Value…You never got in at 8000 and you are planning to at 14000!?…In fact makes sense to liquidate some part at 14000+ Sensex levels
I’ve just seen the Bulls on TV come roaring back with optimistic comments of a new High in Nifty coming up…though they did not care about the time frame and that US $ 50 Billion should be FII Inflows in the next year or Two and that PE derating will stop and in fact reverse as will the Declines in the Growth Rates of Corporate Earnings
While Stability at the Centre is virtually assured,it remains to be seen how the Congress tackles the rising Fiscal Deficit and the Reforms Process and the need for aggressive Capital Formation…all in light of an ongoing Global Economic Crisis
It is premature to be even optimistic about a Strong recovery in Corporate Earnings
However there is over Rs 20000 crores in Cash with Domestic Mutual Funds waiting to be deployed in Equity….This Domestic liquidity coupled with expectations of better FII Inflow will cap the down side and with this Sensational Overnight Optimism created by the Sensational Election Results will result in a higher trading range for the Sensex…12500 to 16000 is a logical guesstimate…Many are already exclaiming ” There is a God!”
Yet,It would be prudent to sell off some part of the portfolio at a Sensex Level of 14000+…Fear (read Sell) when everybody is Greedy !…Isn’t that what Buffett advises…There will be a correction,albeit from a higher base
So what should you sell ?…Remove first the deadweights,even at a Loss…Take advantage of this rally in disposing them….Then reduce exposure in even some selections,where there may be yet some loss,or even some profit….My advice is to stay Heavy with the Heavy weights like Reliance and Larsen for the time being…I love both..The risk with mid caps and low caps and Themes is going to be that much higher with this surge and expect increased Volatility in them…Don’t yet again fall for or be sucked into over optimistic assumptions of Earnings Growth in such companies when you hear Experts on TV or read Research Reports…You can bet there will be a Growth Rate surge in Both ! You’re running the risk of buying into at stretched Valuations
Cautious Optimism is the best recourse so you can also responsibly enjoy this party