April 17, 2009 6:54 PM
Indeed, my core client group made fat 50 % -70 %( in last 1 month), since I wrote you on March 20. I wrote to all of you on 20th March that Bear market rally is approaching faster. Sensex was 8950 on that day, it delivered fat 26 % returns from that day in less than 1 month. But, stocks have run up a lot. Especially, Midcaps, got doubled in 1 month!!!! Yes, 100 % return in a month.
Did you miss the bus??
No. Heck no. Opportunities are there. The only condition is, you need to be ahead the curve.
It leads to again the same old but new question: What next?
Will this rally last longer? Or Will fizzle out from recent high?
Any short answer is difficult now at this level. To answer let us have a look at facts first
n rally started when very few could anticipate hence lots of money waiting outside for 10-15 % dip to enter
n market has reached to overbought zone
n market has rallied 39 % from the base of 8100
n fundamentally, as I had explained in last mail, some raw data has started showing improvement on the back of effects of stimulus packages declared last year and on easing credit situation. China has shown significant improvement in credit expansion, this has raised hopes that growth engine may resume again
n We have also seen improvement in commodity prices on the back of market recovery and news that US, UK and Japan started printing currency.
Now, What Next?
Those, who missed the entire rally expecting it would be a 10-12 % rise from the low and will again come down, should wait, now. There could be 2 scenarios going forward. (1) As market has run up a lot, it may correct now in next week and may come down to the level of 9900 and in further correction upto 9500 in 15 days to 1 month and from there market may resume uptrend again. (2) since lots of money waiting outside, any minor correction may tempt them to enter the rally and hence fuelling the rally to next highs and this may help market to extend the rally up to 12000 -12500 before it corrects significantly.
In both the situation, market is likely to remain in uptrend and on lower side, market may go up to 12500 and on higher side up to 14500. Hence, use the said levels to enter in the market keeping potential risk and volatility of the market in mind, keep hawkish eye on trend and price instead of value and what analysts are saying, you may mint good money.
Which scenario we are into right now that only market can tell us as days unfold next week.
Does this mean that we are out of recession, deflation and bear market? Why those big terms are out of focus suddenly?
For sure, world is not out of economic problems. I had explained reasons in my March mail, why a rally will resume even in bad economic situation? I have attached my March mail for your reference.
Updates on recommended investments:
GILT fund: G-sec yields have come down hence those who invested on top might have reached to break even or in profit. Use this opportunity to exit from G-secs. Govt has unprecedented borrowing
schedule this fiscal, of the historical amount of Rs. 300000 crore. This plus fiscal deficit generated by new govt. will put pressure on yields.
Gold: Gold has come down from the high of $1000, there are strong supports at $835 and $ 820. Use this as an opportunity to accumulate it. Do not think for a moment that Gold’s bull market is over.
Gold is correcting on the back of news that IMF will sell gold, but it is very small amount just 400 tones, just 20 % of only India ’s yearly consumption. Also, IMF need permission from several authorities,
Will IMF get that nod this year or not, is also to be seen.
Renuka Sugar: It went up to 111. Nice fat 54 % return in 3 months from the day of recommendation. I recommended it on 73.
More updates in next mail.
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