Divali Investor

Towards Divali of every year investors expect the market to do well. It is one of those end year phenomenon which cannot be easily explained by common rationality. In fact from 1998 every single year market has gone up during Divali.

During this Divali the Investment Pundits in India have become very cautious. Ever optimistic star investor Rakesh Jhunjhunwala could be easily quoted on CNBC that the inevitable correction in the market is near. He still believes in the long term future of the Indian market, saying that we are still in the initial phase of the long term India Growth story.

The markets are showing signs of being overheated. This is clearly evident from the stocks that are doubling in very short period of time.

We have seen many level wise correction in the market in the past one year or so. That is every time the market touches a particular psychological landmark level it goes for a correction. But we are yet to see good time-wise correction, which is not necessarily level dependent. For example a correction with a bear phase that lasts for many months to a year.

The long term market gurus say that these bear phases are not something to worry about. The markets may decline to levels that might be painful for people who rely on stock markets for their income. But this would provide the investors an opportunity to purchase the shares of companies at even better valuations.