Wednesday, May 06, 2009

New Bull Market or Bear Market Sucker Rally?

The near 50% rise from the October lows in the Indian stock market indices (from 8000 to 12000) have started the debate of whether this is the beginning of a new bull market or a bear market sucker rally. Most people have been surprised and caught unprepared for this steep bull rally. I have used this rally to prune my portfolio to a more manageable number of stocks.

To be honest, I am as confused as the next guy on whether this is the beginning of a new bull market or a bear market sucker rally. Personally, I think it is a violent bear market rally and markets will test the previous lows. Now, what will trigger the fall is anyone's guess. Maybe politics, maybe the 'swine flu' or maybe a bankruptcy declaration by a company like General Motors. But something will happen to take the markets lower.

I will take some more money off the table in the next week, before the election results are out. At worst, I will miss 5-10% of the upmove if a stable government is formed. On the other hand, if there is a hung parliament, the markets may sell off.

Let's see what happens next. As the saying goes, we live in interesting times!

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