Consider the fact that BSE Sensex and Nifty have given a return of around 125% over their March 2009 lows. Would you not like to take some money home? Although, as a Financial planner I am not supposed to advocate timing the market, but then it is prudent to suggest partial profit booking. After all investors take the risk for making money on equity markets, and profit booking is a means to realise those gains.
The recent signals emanating from global markets do not instill confidence in the sustained bull run, our markets have to take a breather before they gather enough steam to scale new highs. The global recovery based on stimulus packages seems to have run its course. IMF sees growth slowing down in top 3 economies of the world: USA, China and Japan. The strengthening of the US Dollar and the Japanese Yen, considered as safe havens in a crisis situation, is a pointer in this direction. Foreign institutional investors have started booking profits in some frontier markets such as Vietnam, Pakistan and Ireland. India and China could be next on their radar.
In such a scenario investors are better advised to book profits, especially in the momentum stocks/sectors which have run up too fast in the past few weeks. Investments on declines can be considered in the sectors that have lagged behind in the last bull run. They could be the ones that could help you ride the next bull run. I have an inkling for Telecom (Bharti Airtel) and Oil (Reliance Industries). However fresh investments could be staggered over the next 3-4 months. However investments in Mutual funds through SIP route should be continued religiously, with the option of a top up if the markets dip substantially. Investment in Gold, also on declines, could also be considered as it is likely to pay rich dividends as the demand for gold has been going up steadily without any commensurate increase in supply.
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