When markets trade sideward’s or slowly trend down, investors must alter their approach to make the best of the opportunity. Often, this phase comes after a new high has been touched and the markets begin to lose momentum. When markets are unable to sustain the momentum, they slide gradually. But, investors expect the markets to touch the highs again. What actually happens could well be the reverse as markets struggle to regain momentum. The market then tends to trend downwards and is unable to regain the upward momentum. The culprit in such situations is either slowing investment flows or soaring paper supply. The Indian markets will be tested on both counts in the coming months and it will be interesting to see where the markets settle. The spate of IPO’s, FPO’s, preferential issues, rights issues and disinvestments will keep the investors too busy to look at the secondary markets. When issuances become one too many, they tend to grab investor attention and divert money from the secondary markets into new issues. This leads to a slow downtrend in the secondary markets and trends become extremely stock specific. For investors wanting to get into the markets or raise their participation, this phase is a great opportunity. One must keep himself fully focused on value as a decision tool. Buy where you see value and stick to value as the investment decision variable.
“In economics things take longer to happen than you think they will, and then they happen faster than you thought they could.”- Rudiger Dornbusch