Mid-Week Analysis

It's Time to Lighten Your Exposure to Securities

For those who fancy cashing in on the volatility and perceived weakness, connect with your financial planners

It's Time to Lighten Your Exposure to Securities
In Short-term, Light Just Seems Right
Gaurav Bhagat - 22 July 2021

Welcome back, I hope you all had a good week in the markets and otherwise too.

In my article last week, I mentioned how the bulls and bears were busy taking shots at each other from the trenches and there was no clear winner. On Thursday the Nifty came within 40 points of hitting 16,000 and that could have resulted in a breakout to 16,200 and maybe even 16,400 but that was not, the counter offensive by the bears followed, and a slightly weaker Friday was followed by a gap down Monday and Tuesday. No doubt the Dow Jones was the catalyst for the same and we mirrored the negative sentiment of the Dow. Now some of you might feel that subsequently on Tuesday and Wednesday the Dow pulled back everything and as we had a holiday on July 21, we should now run up on July 22. It is possible, but it just seems that now may be the time to lighten one’s exposure to the markets further.

I won’t be surprised if we test 15,500 in the coming week and even gradually hit 15,000 on the Nifty in August. The small caps will fare even worse, the penny stocks and those stocks with doubtful fundamentals will get slaughtered. In my article on July 1, I wrote about how it was time to spring clean. Happy to share that since then I’ve been able to exit all of those stocks and have also booked between 30-40 per cent in some of the other shares in which I had done really well in the past year.

If at the start of the month I was 70 per cent invested and 30 per cent in cash, by the time today’s session plays out I will be 50 per cent invested and 50 per cent in cash. I know it’s hard but this is the time to sit on cash and be ready to deploy when the opportunity presents itself. The opportunity though could come in two weeks or two months, but we must never forget that good thing comes to those that wait.

For those that still fancy cashing in on the volatility and perceived weakness, connect with your financial planners and relationship managers and check with them on the possibility of using derivatives like options to leverage your positions. Very few of the investing fraternity in India understand or are aware of the options available. It requires a little bit of study and understanding so don’t go it alone otherwise you are likely to get hurt.

My plan in the week ahead, avoiding the banks, holding on to pharma, and keeping things light. I like some of the positive news flow in the real estate sector and it’s good to hear developers are finally seeing interest in not only their projects but also their stocks. The sector has been so beaten down and creates so many opportunities that I do hope the momentum continues. Otherwise, it’s 'wait and watch' week, my coach and mentor Grant Cardone, always says players get paid and spectators pay. I know he’s referring to sales and business, however in the weeks ahead I feel players will pay and the spectators will get paid. So, let’s see what happens.

You all have a great week ahead, stay safe, stay well and enjoy the rains.

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