I see a lot of views about concerns related to small cap and midcap rally. People try to come out with complicated formulae to put up a hypothesis that these indices are over stretched and ripe for a correction.
Well, they might correct, or they may not, but I am not in the camp of forecasting stuff. I try to follow the trend and make the most of it. I focus on the stocks that I hold, and keep looking out for any signs of trouble.
A famous quote attributed to Sir John Templeton is very apt to summarise current situation in the market, and more so in small and midcap space. “Bull markets are born on pessimism, grown on skepticism, mature on optimism, and die on euphoria .” To me there seems to be a lot of skepticism and some optimism. In next few weeks and months, who knows, euphoria could follow.
As investors we need to understand how to benefit from bull markets and make the most of them. The final euphoric phase of parabolic moves often provides very good opportunities of wealth creation. More so if you are into the sectors in fancy and the preferred stocks in those sectors. If you can ride them successfully a lot of wealth can be created. As investors our focus should be to learn how to ride these bull markets rather than keep worrying about things in the future.
It’s a well known fact that strong bull markets are followed by bear markets. But we cannot keep living in the fear of a bear market and keep sitting on the sidelines in the face of strong rallies. I have learnt a long time ago, that “If you can’t beat them, join them.” We are having a very strong small and midcap bull market and its visible since last few weeks too. We had nifty in a consolidation/corrective mode, but the small and midcaps kept rallying hard.
Now this week Nifty also seems to have started showing strength and has closed strong for the week above the important resistance of 19600.
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