I have remained almost 100% invested in stocks all through the past few months. I often feel tempted to get into cash off and on but till now have resisted the temptation to do so. Primary reason being that I find conflicting signals coming through while looking at the markets.
There are some segments of markets that seem frothy like the high quality basket consisting of stocks like dmart, bajaj finance, HFCs etc. Even some perennial laggards like GVK, HFCL etc are showing some signs of activity.
But on the other hand some companies keep undergoing corrections based on their results and newsflow. So its not as if markets are frothy and headed only in one direction. e.g PI Inds, Hawkins etc which is testing investors’ patience.
One factor which I find disturbing is complacency even in well informed investors. These investors tend nowadays to take extreme valuations also in their stride. There is this oft repeated logic of domestic deluge of money into markets which will keep supporting the markets during corrections. But the question whether bull markets drive liquidity or the liquidity driving bull markets is tricky and wont have an easy answer.
Globally the macro risk of Korean crisis remains but it has not really affected market sentiment to a large degree till date. Even if US were to attack Korea I think the affair would be short lived as Korea doesnt seem to enjoy too much support from any other global countries. But the thread of the crisis has been used very conveniently to explain the market gyrations when no other logical explanation is visible.
At a portfolio level I am seeing some moves in stocks where technical patterns were indicating upmoves. So the ideal thing remains to keep riding these upmoves till signs of exhaustion in the upmove are clearly visible. I would put up these patterns in the presentation I had done at Goa VP meet to take the presentation forward.
As one of our revered investor friends has coined , “There is no absolute truth.” Similarly investing is about maintaing balance between emotions and not getting carried away on either side. I remain a bull who is scared but not shit scared.