Last week I met an investor who was sure that the American markets and the Indian markets will crash in the next fortnight. Why such a ‘precise’ date? Well 16 Oct, 1987 – has its 30th anniversary!

It is really difficult to carry on a very long conversation with people solely based on ‘gut’. This man had about 10% of his networth in equities and he was worried about the market crashing. I said staying out of the markets for 20-30 years of his active life had cost him much more than what the crash could do to hurt him!

When I tell people I think the market is high, the next question that they ask me is “when will it fall?”. Frankly ‘I think it is high’ is a view point. Market can remain at elevated levels for long periods of time, crash, or grind to a lower level – say to 29000 over a 2 year period. All possiblities exist. I have no clue what will happen. I do feel that at these levels if you do not invest you will not look back in 2018/9 and say “OMG I missed the bus”. It is not at mouth watering levels. I seriously do not know whether it is at ‘mouth watering levels’ from a going short point of view. I do think not, but I am not so sure. I am long and I have cash. I have been a trader for the past 18 months, but have occassionally picked up a pharma stock, an infra, a bank, an nbfc with a view to holding. However if I get 30% return in 5 months, I do sell, hoping to buy it back.

I have not been convinced that we could see the symptoms of what can go wrong. Once things go wrong we can find the reasons – and say ‘OMG it was so obvious’. It is not so obvious. Also once the market goes up we pretend that we were willing to pick up at lower prices. When I bought Sun Pharma at 477, my broker felt that there was no visibility of earnings so it was not a good buy. His opinion. I felt Sun was a good trading opportunity – and am willing to sell it off at 577 even if I have to pay Short term cap gain.

Look at the price of Hdfc bank. Clearly the pvt sector banking giant is benefitting from the disciplined life that it has led. It has a demonic control on costs, and has a robust back office. It works on good margins but will put in tremendous hard work to grow its business. The private sector banks together have less than 30% of the banking in India, but is growing at a frentic pace. So is the PE justified over SBI’s pe? Well if the price sustains for say another 3 years you can argue ..YES…but if the crash occurs, you can then say “see Hdfc bank was over-priced”.

Most people I meet say bad things about the current government’s inaction. Without getting into politics, I ask them ‘are you buying or selling’. Most of them are buying.

People ask me ‘is it a time to buy or sell’. I tell them Arundhati of Sbi, Chanda of Icici, Deepak of Hdfc Ltd., Anil of Adag, Kumarmangalam of Birla, NaMo of India are all selling. You cannot get a smarter bunch, can you?

People holding big strong positions should trim some positions for sure. Sitting on cash helps – at leas when the market falls you are sitting on cash. Use this cash to buy good quantum of good stuff that you always kept postponing the buy transaction!

more to follow…