India: Market is up sharply...Be Careful

After selling net Rs. 1,306cr on October 29, 2008 FII's came back to buy Rs 1,237cr today, October 31. The net result was:

Sensex close 9,788 up 7.4%, Nifty close 2,885 up 7.0%.

The funds have managed to create a better looking NAV for month-end, but nothing has changed. We are still in a de-leveraging environment; redemptions will continue despite the games being played with month end figures.

Bear markets have vicious rallies; these are wonderful traps. Don't get caught. Use these rallies to exit and be ready for a lower risk environment; hoard your cash.

The only two companies I have bought when the market was 2550 and am holding for long term:

ONGC at Rs 550, ICICI Bank at Rs 330 (p/e 10)

In both cases, a few years forward, it will be hard to imagine that price was at these levels.

I continue to be on the sidelines..and although I may put 5% of capital to work at these levels, I will avoid real estate and banking...energy may be interesting

In both cases, we will see my buy-in prices or lower before spring 2009...