Short the market, long select stocks on dips

Getting to the blog after a long time :), have seen my own ups and downs.

Lessons learnt in the last few months by me

1. The curse of the Early bird: When the markets crashed last December, I held 2 puts. Sold them a bit too soon to gain meaningful profits out of them and re-invested in stocks just to make further losses.

2. Under-rating the bear run: Most of us have become so used to the bull run that we under-estimate the duration and intensity of the bear run and consider every rally as a reversal.

3. Portfolio Decay: Portfolios have decayed from front-line stocks to penny stocks in anticipation of a bull run.Need to re-jig portfolios to a) get out of junk stocks even at a loss b) get defensive and in cash if possible


The markets have too much uncertainty for now:
a. The US markets are still confused about the impact of the financial crisis and the impact of the US 700bn USD, if it comes at all

b. If the relief package actually comes out, will need to see how the inflationary effects from the same fan out and whether it affects interest rates and oil prices

c. The direction of commodity prices driven by EM consumption and US effects, especially oil as the winter season approaches

d. IT, Real Esate, Aviation in India continue to be under pressure due to slowing demand

e. Q1 results have been encouraging, but the actual effects of higher cost and lower consumption effects might be felt in Q2 results, Will need to test the hypothesis as the results pan out

f. MTM losses for corporates(exporters) because they misread the direction of USD-INR movement, importers(due to rupee depreciation), oil companies(subsidies), banks (exposure to foreign banks and treasury held)


Based on above reasons, with the only +ve being sentiment from the nuclear deal, the overall direction appears -ve.

Short the market to protect at least 33%-50% of the portfolio if index drops below 4000 and continues to remain there.

Will post soon for select stops which can be aggregated over the next few months