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Monday, 7 February 2011

"You Pay A Very High Price In The Stock Market For A Cheery Consensus" -- Warren Buffet

"Be Fearful When Others Are Greedy and Greedy When Others Are Fearful' -- Warren Buffet

"Buy when there's blood in the streets, even if the blood is your own." -- Baron Rothschild

Here are some reasons why I am more optimistic today than a few months back:

  • Everyone is either bearish or non-commital.  Practically no one is talking about the "India growth story" anymore
  • Mutual funds and ULIPS have very little cash inflows and very high cash levels in their portfolios
  • Bad news and results has impacted the sentiment negatively - be it Egypt or Inflation or Corruption, everyong is spreading the word of doom. Stocks of companies coming out with good results are getting sold to lock in profits and stocks of companies coming out with bad or mediocre results are getting sold to prevent losses.
  • IPOs are on the back burner once again as companies are not sure of investor interest
  • Food inflation is getting lower (prices of vegetables have gone down in the local markets) and we are likely to see inflation numbers come down  in the next 2-3 weeks
  • With the current situation the Central government is in, I think the budget will be a non-event in terms of policy making. I do not expect any big surprises in either direct or indirect taxes.
  • Egyptians are likely to sort out their problems or the world is likely to find something more interesting to move on to.
  • Indian markets are in a bear grip and stocks are getting cheaper by the day. Adding on corrections should be a prudent option for long term investors. What I am doing is adding at every 4-5% dip in price in my stocks. But do not rush in and exhaust all your cash now. Keep some away (I would suggest 50% of of your fresh cash surplus) to invest in case the Sensex decides to move further south from here.

Happy Investing!

3 comments:

  1. Good article Abhi. Atleast I was quite scared to put any money now, though I knew it was a good time to shop for some items which I wanted to buy some time back! Now I would keep my eyes and ears open and alert!

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  2. Yes Nandi, I would be very surprised if we fail to make good gains over a 2-3 year period, if we can stagger and buy now.

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  3. Abhi - an interesting trend that I noticed. Look at the indices of all the major exchanges around the world and you will notice the peak and then the crash around 2007-08, same as the Sensex. After that all indices are now recovering and doing better. But what I found intriguing is the fact that _only_ the Sensex seems to have regained the pre-crash levels before this current slide. Let alone the developed nations, not even the China indices have achieved their pre-crash levels. Makes me suspect that the market in India has been a little overoptimistic and will need to correct itself quite a bit.

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