Indian markets have had a dream run in 2007. And there are prospects of a dream run in the coming year too.
However, no long distance runner runs the entire race at the same speed. There are times for pauses, to gather strenght. In financial jargon,"consolidation" or "correction" in some cases.
I feel that markets are richly valued at the current moment and there is a probability of some excesses(read bubbles) in the market, which might burst if they blow up excessively.
Have bought a PUT option to protect my portfolio, against a NIFTY-wide fall. Avoid committing fresh money till results of this quarter are out. Stay in cash, and if NIFTY runs up a bit, buy a put to hedge against a fall. especially if you are holding large caps in high quantities.
Ideal Situation: 25% cash + Hedge for atleast around 25% of your portfolio
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