Discipline, Money Management & Stop-loss Management are Current Keywords in the Markets
The markets will take some time to consolidate and should get there somewhere between Diwali and Christmas
Welcome back, I hope you all had a good week in the markets and otherwise too.
What a super run it’s been over the last 3 days, last week on Friday the Nifty was trading at 16,600 levels and within 3 trading sessions, it went all the way to 17,225 before pulling back a little towards the end of trading on Wednesday. The rise took everyone by surprise and the speed at which the market has risen and how quickly 17,000 fell left market watchers astonished. Almost no one I spoke to had said that these levels would come so quickly. But they did. Interestingly the bounce in the small caps and the mid-caps has been phenomenal too, lets also not forget that the bank nifty finally came to the party as well. The question on everyone’s mind is that with everything looking good what happens next?
An interesting development for me on Tuesday was the return of the FII’s, after months of selling, they came in and bought with a bang, in fact, Rs 3,881 crore of buying by them hasn’t been seen in months. I had written a few weeks ago if China’s loss could be India’s gain. As some commentators in China called President Xi’s crackdown a “Profound Revolution” I would just wonder if we would see some asset reallocation happen in the region. Of course, let’s not forget that the DII’s have been relentless buyers in the last few months and if FII’s start buying, then I am quite certain the DII’s would book some profit. Let’s see how that game plays out.
I also feel one of the reasons that the market moved up so quickly was that many traders had taken neutral to bearish positions during the Jackson hole symposium and once the Fed statement proved that it was not a negative trigger, they were caught on the wrong foot. As the markets started to rise on Monday the bears had to start unwinding their positions and the market went up further. My money was on the market hitting 17,000 before it hit 15,000 and I’m glad that paid off. Now, do we carry on towards 18,000? Well, it could happen, though I feel the markets will take some time to consolidate and should get there somewhere between Diwali and Christmas. These however are crazy times of euphoria and anything is possible. Discipline, money management, and stop-loss management are very important, in fact, probably haven’t been as important ever before. Investors and traders get carried away at the moment and regret later, trust me, I’ve been there before as well and if you feel emotion is getting the better of you, then consult a professional and take their advice on the way forward.
My personal plan for the week ahead is to ride the wave a little longer, last week I’d mentioned how I would get back into beaten-down midcaps and that really paid off. Also, all the stocks in the space of travel, hospitality, and entertainment were top performers, and rarely have I seen such a good run in such a short period. So will just let it keep going and using a trailing stop loss so that I don’t end up giving back all the gains. I do believe while the market gives, it knows how to take back twice as quickly as well. Always safe rather than sorry. Pharmaceutical stocks showed some signs of life and let’s watch to see where that goes, the Indian Rupee really zoomed, and naturally, that had an effect on IT stocks which have paused to catch their breath. The monthly auto sales reports were bad, but some of those stocks still rose, again it’s possible that traders had sold hoping for a further downward move after the auto numbers came out and were trapped. I’m staying away from auto at the moment. Overall, I have about 80 per cent of my capital back in the market as of last week and will start lightening some positions only if I sense something is changing. Until then let’s hope like C.S Lewis once wrote “onward and upward”.
I wish you all a great week ahead. Stay safe, stay well and stay financially healthy. Always.