Book Profits in the Rally

The Indian market has exhibited some strength over the past few weeks. The market is now in its eighth week of rise from its October intra-day lows.

The BSE Sensex is up 31% since its October lows and this is the fourth time since the bear market started in January that we’ve seen a rally of 20%+ and the longest one thus far. The broad market has started to outperform the narrow market with a 5% outperformance over the past week.

We think investors should booking profits. Fundamentals remain weak and we do not think valuations have become “cheap” – although they are fair (Exhibit 5). Earnings for this quarter are likely to be quite bad when they are announced in January. This is a typical year-end rally which tends to sell off in February.

This is significant divergence from what Financial Astrologer has predicted 🙂 Anyway, our goal is to stay for long term in the market eating profits wherever possible 🙂