- Wealth PMS (50L+)
The Sensex has hit the 12,450 mark, just short of it’s all time high of 12,671 in May. What does one do now?
The recent rally has been a large cap rally, quite heavy on the banking sector. Are bank stocks good? I see stable interest rates in the near term, though on the longer term we need to increase rates to be competitive worldwide. Real estate is slowing down, and in many metros even declining; in my opinion, there will be panic sales in 1st Quarter 2007 which will hit banks hard with defaults and negotiations. Treasury income has dried up and in the next two quarters will show no real sign of change.
I believe this is a temporary rally. The other heavyweights that have rebounded are oil stocks but not by much. Most of the FMCG counters (HLL, ITC) are overpriced, and so are the real estate plays (Bata, Indiabulls etc.) I think the market is overheated and now the “panic buys” are setting in; people are buying because they feel this rally will go on to 15,000!
It’s time for the smart investors to look to exit. If this market hits 13,000 in four more trading sessions (next Friday) it is REALLY a panic situation and you should sell half your holdings in the heavyweights. Midcaps will follow the leaders and they might go up 10-20% in this rally, sell when each stock goes up 20% from where it is today.
You will get an opportunity to buy back at a much lower rate. The market will crash after Diwali and stay down till november end, in my foresight.
But if the market retains current prices and hovers around these levels for a long time (till October end) please ignore my prediction.