The markets rallied over the last few days and there was a bounce back. The market sentiments improved due to a drop in the rate of inflation, rate cut by the Reserve Bank of India (RBI), fuel prices cut, financial stimulus package announced by the government and some positive news from global markets.
Currently, a rally in many beaten down sectors like banks, real estate and some select mid-cap stocks is on. Most of the stocks in these sectors have bounced back 20 to 30 percent from their yearly lows. However, analysts believe this rally is just a technical pull-back rally in a bear market. There are no clear and decisive signals that economic and business conditions are improving. Current, the rally is based on cuts and packages announced by the government and the RBI, and expectations that more measures will be announced.
Analysts believe the relief measures announced by the government are too small to handle the slowdown and investors should not expect something very dramatic from government in the coming days as they have limited options. Therefore, small investors should exercise extreme caution in the current market conditions.
Some strategies for investors:
A) Short-term investors
Investors willing to ride the short-term market rallies should be very careful and attentive to market news. They should track market movements closely and maintain a tight stop loss and book-profit level for their open positions. Since the markets are quite volatile, overnight open positions could be very dangerous, especially in the futures and options markets.
Short-term investors should remain in continuous touch with the markets. It is advisable for them to watch the market closely, especially if they are holding any open positions.
B) Medium and long-term investors
The market conditions are changing quite rapidly. It is very important for medium and long-term investors to have patience, and analyse the market and business conditions before making investment decisions. The next six weeks are expected to be quite crucial for the markets. Also, some data on the impact of the current monetary policy cuts announced by the RBI and stimulus packages announced by government will be in.
Existing investors who entered at lower levels should look at selling partially and booking some profits as the markets have gone up. Analysts believe the current market is just a bear market rally and it will fizzle out once the market rumors settle down. Therefore, investors can liquidate some positions and wait for better investment opportunities in the market.
Investors trapped on under-performing stocks should look for exit opportunities in the current market and switch to other stocks and sectors. Investors looking at investing should buy large-cap (index companies) and large mid-cap companies only.
Since the markets are quite volatile with a negative bias, it is important to accumulate in short quantities. Investors should buy or sell in small lots so that they can get a good average entry (or exit) price.
Since investments in market instruments come with a risk of loss, investors with a low risk appetite should either stay away from stocks or invest through equity mutual funds.
Currently, a rally in many beaten down sectors like banks, real estate and some select mid-cap stocks is on. Most of the stocks in these sectors have bounced back 20 to 30 percent from their yearly lows. However, analysts believe this rally is just a technical pull-back rally in a bear market. There are no clear and decisive signals that economic and business conditions are improving. Current, the rally is based on cuts and packages announced by the government and the RBI, and expectations that more measures will be announced.
Analysts believe the relief measures announced by the government are too small to handle the slowdown and investors should not expect something very dramatic from government in the coming days as they have limited options. Therefore, small investors should exercise extreme caution in the current market conditions.
Some strategies for investors:
A) Short-term investors
Investors willing to ride the short-term market rallies should be very careful and attentive to market news. They should track market movements closely and maintain a tight stop loss and book-profit level for their open positions. Since the markets are quite volatile, overnight open positions could be very dangerous, especially in the futures and options markets.
Short-term investors should remain in continuous touch with the markets. It is advisable for them to watch the market closely, especially if they are holding any open positions.
B) Medium and long-term investors
The market conditions are changing quite rapidly. It is very important for medium and long-term investors to have patience, and analyse the market and business conditions before making investment decisions. The next six weeks are expected to be quite crucial for the markets. Also, some data on the impact of the current monetary policy cuts announced by the RBI and stimulus packages announced by government will be in.
Existing investors who entered at lower levels should look at selling partially and booking some profits as the markets have gone up. Analysts believe the current market is just a bear market rally and it will fizzle out once the market rumors settle down. Therefore, investors can liquidate some positions and wait for better investment opportunities in the market.
Investors trapped on under-performing stocks should look for exit opportunities in the current market and switch to other stocks and sectors. Investors looking at investing should buy large-cap (index companies) and large mid-cap companies only.
Since the markets are quite volatile with a negative bias, it is important to accumulate in short quantities. Investors should buy or sell in small lots so that they can get a good average entry (or exit) price.
Since investments in market instruments come with a risk of loss, investors with a low risk appetite should either stay away from stocks or invest through equity mutual funds.
