Sensex at 12.5k: What should I do next?

Infosys 2QFY07 results are finally out. The company, easily the metaphor for the new vibrant India Inc., has more or less for quite some time now set the tone for the results season. Thus when Infosys manages to beat street estimates, it is more or less confirmed that atleast the new economy companies are going to do an encore. In times such as these, where even the most pessimistic investor can see optimism as far as his mental faculties allow him to see, markets do not hesitate in giving these companies their due. We are talking about rewards in terms of further addition to their already gargantuan market capitalisation.

Wait! Aren’t we supposed to see a pause in rally and witness some correction given that valuations have started looking expensive? This million-dollar question must have surely crossed your mind. If you are one of those investors who have been thinking along similar lines, then we believe you are making one of the most fundamental mistakes of trying to time the market. In other words, you are hoping that markets would fall and you would then invest your hard earned money so that when the market regains its northbound journey, you will profit along the way. If it was this simple, everybody ought to be rich and people wouldn’t have lost their shirts trying to play the market. History suggests that no successful investor has ever made substantial returns by trying to predict the timings of the fall and rise in stock markets.

Now that you have got your basics right, let us try and find answers to the relevant questions at hand.

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Additional Readings:
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Parting Thought:
  • If the business does well, the stock eventually follows. – Warren Buffett
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