Nifty to be highly volatile and then bear market to begin
CEO at http://www.softwareandfinance.com
Dec 24, 2010 Nifty closed today at 6011.60 down by 5.15% from its recent annual high of 6338.50.
Indian Stock Market is getting more attention worldwide and increased fund flow from foreign investors and hedge funds. This shows that Nifty is in the topping process and stock prices to be highly volatile.
As many investors and foreign hedge funds are eagar to put money into indian market, they are waiting for a pullback. On Each Pull back, we can expect new money to get into Indian Market and it will cause a huge volatility in the next 3-4 months.
Once Indian market becomes out of favour, then stocks are more vulnerable for a sharp pullback followed by a bear market due to increased inflation in India along with real estate bubble. Indian Stock Market will have a hectic time around second half of 2011 and until then the market will be highly volatile. Stock markets reflect an country's future state of the economy and not the current state. Even if the pull back in the indian economy happen in early or late 2012, the effects can be seen as ealry as second half of 2011.
The following are the good long term investment strategy for Indian Stock Market:
1. Long position on "Long Dated Indian Government Bonds"
2. Gradually accumulating the short positions on indian market along with call option hedging.
Currently a very High Risk Trade is to bet the indian market to go in either direction by betting the increased volatility.
Written by Kathir, California.
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