Is It Time for Caution in the Stock Market?

Jul 9, 2020

Try searching this online - Top unsolved mysteries in the world?

Most likely you'll find the Bermuda triangle, UFO's, how did life on earth start etc.

But there's one unsolved mystery you'll rarely find online or being talked about much...

How to find the end of a bull or bear market?

Like the world's major unsolved mysteries, no one has been able to crack the market.

Despite powerful computers, loads of data available, hardly anyone has been able to crack the market cycle.

The market does provide hints...but only if we keep our eyes and ears open.

There's one common trait seen in the end of all past bull markets i.e. stocks going up regardless of fundamentals.

You will see shares of loss making firms also going up 10-20% every day. Companies with questionable corporate governance will see their stock prices hit lifetime highs.

Take the current Indian share market for example. Is it trying to tell us something?

Let's take MTNL for example..

As I write this, the MTNL share price is up nearly 100% since its low on March 24, 2020.

Advertisement
  India's Next War  
   
  Recently, both China and Pakistan have started amping up tensions at the border.

So, now India faces a possible 2-front war scenario.

And this calls for a heavy deployment of future-ready and highly advanced weapons at our borders.

We are talking next generation tanks, guns and even high-tech equipment like drones.

Now unlike in the past where all this money was spent with foreign companies, now, it's being redirected to Indian companies.

For a few Indian defence companies...this is a mega growth opportunity.

And for investors... it's a rare opportunity to make potentially huge gains as select defence companies see their growth, and therefore stock prices, potentially shoot up.

To learn everything about this new, and huge, opportunity, Click Here to join Equitymaster's Explosive Profits Summit.

At this exclusive summit, you will also get to access details of what we call our #1 defence stock pick.

It's a potential 10x opportunity in the long term.



We hate spam as much as you do. Please read our Privacy Policy & Terms Of Use.

By submitting your email address, you also sign up for Profit Hunter, a Free-for-life newsletter from Equitymaster, which offers the most profitable investing ideas in India
 


I was astonished when I looked at this price rise. Surely, there has to be some fundamental reason behind this, I thought.

I checked but couldn't find any.

In fact, MTNL has been consistently making losses since a decade. The fundamentals haven't changed.

But the stock market doesn't care right now.

When retail investors are lured into stocks like these, it is a sign. We saw this in the 2000 and 2007 bull runs as well. Stocks going up 10-20% daily without any rhyme or reason.

Is history about to repeat itself? And what should investors do in such a situation?

#1 Small-Cap Stock: Biggest Opportunity in the Indian FMCG Market

I wrote to you in my previous editorial that taking extreme positions in any market might not be sensible.

I'll tell you how we are trying to navigate the market now for our Hidden Treasure subscribers.

First and foremost, we've filtered out stocks with weak fundamentals be it in their business models or corporate governance issues.

Also, with the uncertainty around Covid-19, our main focus has been on businesses catering to essential needs.

I wrote to you last week about two food and agri stocks we've picked recently. These have done well and are likely to do well in the future.

--- Advertisement ---
For Those Looking to Buy Stocks

If you're looking to buy stocks now, then we've uncovered 3 great stocks for you.

Our research says, these stocks have the potential to create a wave of Indian millionaires.

Get the Details Now
------------------------------

Another thing we're trying to do is weed out the bad stocks. We've shortlisted a few stocks where our thesis hasn't worked as expected.

The current market rally gives us the chance to get rid of these businesses, which most likely won't recover. Subscribers should watch out for our update.

For you too, dear reader, now might be the best time to get rid of weak stocks in your portfolio.

If you've bought fundamentally strong stocks, you need not worry about where the market is headed next. Yes, there might be temporary corrections in your stocks too if there is a market crash.

But as my colleague Richa wrote to you recently, if you pick the good ones, they most likely will bounce back.

You would do well to focus on your stocks right now. As long as humans are alive, predicting bull and bear markets will remain an unsolved mystery.

Warm regards,

Girish Shetty
Girish Shetty
Research Analyst, Hidden Treasure
Equitymaster Agora Research Private Limited (Research Analyst)

PS: Join India's #1 trader, Vijay Bhambwani, tomorrow at the Instant Income Summit, online at 5 pm. Vijay will show you how to make thousands of rupees in steady monthly income. Register for free here...

Recent Articles

I Trust Tanushree to Do a Jim Rogers and Unlock Huge Gains from Defence Stocks October 19, 2020
The set up that made Jim Rogers famous is now up for grabs in India.
Why India's Drone Revolution is a 4x Profit Opportunity October 16, 2020
My research on India's leading defence companies brought me to one major player in drone manufacturing.
Here's How You Can Join India's Ascent in the Global Drone Revolution October 15, 2020
'The Chinese drone market is 14 times that of India's. Billions may flow into Indian drone companies too. Don't miss out on this wealth creating opportunity.
The Biggest Wealth Creating Opportunity that No One is Talking About October 14, 2020
The defence sector has gone under the radar despite positive developments. Here's why this sector can't be ignored for long...

Equitymaster requests your view! Post a comment on "Is It Time for Caution in the Stock Market?". Click here!

1 Responses to "Is It Time for Caution in the Stock Market?"

Surendra

Jul 9, 2020

This is the time to be cautious in the stock market. Stock market post-covid has defied fundamentals. Either it is a bull trap or markets have their own mind defying logic. But as an investor i prefer to hold back my horses and at best invest in staggered manner in fundamentally sound companies (recommended by Equitymaster).

Thanks and Have a great day

Regards

Like 
  
Equitymaster requests your view! Post a comment on "Is It Time for Caution in the Stock Market?". Click here!