As the Nifty continues its up move, there is a sudden rush among retail investors to participate in the bull market. Easy money is here again!
Investors must remember that this bull move started three weeks ago. The Nifty has gained 20%+ since then. Surely, the market can gain more, maybe 30% or even more. But, investors must understand that the risk reward ratio no longer favors them. If you invest now, you may earn money, and, then again, you may not.
For traders, the decision is easy. Buy on dips. When these buying positions begin to lose money, the bear rally may be coming to a pause.
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Mustafa asked me to switch on RSS feeds for comments. This option is already switched on. I need to provide a link to subscribe to comments, which I could not manage to do. (Not Yet!) I did provide a section where the last five comments are displayed. Look in the right column!
July 2 2010
4 weeks ago
Posts
6 comments:
It seems to be sudarshan ji,
may be this rally is going crack as fast as it build up,next time 2500 wont offer any support.This time we are going to see a bottom.
Today retail investors were buying even 15 point dip,people become bullish,where they didnt cover their shorts till 3000.now they want to go long at these levels,again only retail investors are going to lose money.
Stay cautious my dear friends.
sudarshan ji Please write a article about options.
Regards.
Thank you sir for putting latest comments in the sidebar. I'll however wait for subscribing all of the comments. Comments will help me better understand what the query was from the readers and your response to that.
Mustafa
Sir to add Comments Subscription, you have to add a Gadget in Blogger Layout. Adding 'SUBCRIPTION LINKS' gadget will show options to subscribe to posts + comments. Request this feature in all your blogs.
But Nifty going back to 2575 wont be a so easy task perhaps..it wont happen in next few days..may be even few weeks..it wud take primary supports near 2850/2700 etc before finally cracking for 2575....so it can consume good enough time before falling to alarming lower levels..I feel so..
What is a bottom..??
As per my understanding a bottom is formed where valuations become so attractive that institutional money is forced to take note of cheap valuations and go for "accumulation".
I have used the world "accumulation" & not "buy".
World "BUY" is wild in nature and forces to throw unreasonable portion of available fund (sometimes even exceeding the risk appetite) into a particular asset class(we are discussing equity here).
So when valuations become too attractive then institutional money starts flowing into scrips which promise value enhancement over a period of time through overall growth in their business.
This money inflow by institutions into "value scrips" is based on deep fundamental research based on concrete information & expertise to predict the fundamental growth in company's core business in times to come.
These scrips now start showing increase in volumes slowly slowly along with consolidation "around" a specific price line for good enough time(even few years in many cases).
From here a retail investor can pick the action with the help of charts and follow the institutional money to include few "GEM" in his/her portfolio but still with a strict & regular watch on the price movements.
So who finally decides the "BOTTOM"or the "GEM" for next possible BULL RUN..??
It is always institutional money and of course not retail investor.
So what is lesson learnt from above discussion-
A retail investor should understand his/her limitations and should never try to go for adventures like cherry picking or bottom fishing or trying to predict the bottom. This is because forces which really affect the scrip or market movements are really BIG INSTITUTIONS and it is safer to follow them than to try to become over smart ahead of them.
The same is true in case of booking profits at higher levels. A retail investors should always keep an eye for any possibility of sustained distribution happening at higher levels and act accordingly.
But all this requires a regular touch with the market/scrip movements and also some basic skills to catch the price action.
If one can not do above on his/her own then it is better keep from stock market and invest in old conventional methods like bank or post office products.
(I strongly believe that even for investing through mutual funds one should have at least basic understand of equity market mechanism and its cycles).
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