Sensex falls 412 pts: Where do we go from here?

Excerpts from Closing Bell on CNBC-TV18 Watch the full show » ALSO READ See what other experts are saying about markets See what FIIs are saying about the markets See what Udayan Mukherjee is saying about the markets Nifty BSE | NSE 29/05/12 Are Mutual Funds betting on Nifty?

Rajen Shah of Angel Broking too emphasizes on the fact that small and midcap space would be the place to be in 2007. 'There are plenty of good opportunities, which have done well over the last three-four quarters, and yet they have actually been laggards in this bull run. So I think 2007 is going to be surely for small and midcaps and I see significant out performance from the frontline stocks.'

 

Regarding the Sensex losing a significant amount of points today, Shah says that it was expected. 'We had maintained that if the markets go above 14,000 and into the zone of over optimism, the valuations would get a bit over stretched at 20 times the earnings. So we had expected a correction,' he says.

 

But K Ramachandran of BNP Paribas is still bullish on the markets. He believes India is on a very strong wicket as far as the exchange front is concerned.  "I don't think there is any reason to worry, though I think the market was literally inching for a correction and retardation so whatever comes its way the market clutches at it," he says. But he does feel that this was an excessive reaction and the market didn't deserve to fall the way it did.

 

Alright, so the correction was expected. But what's next? Will the markets leave the investors in a mood to party for the new year?

 

"I feel that the markets will consolidate between 12,800 and 14,000 for at least the next four-six weeks before we begin the pre-Budget rally. At the lower end, I think the markets will again touch the lows of 12,800 or so," says Shah.  

 

So what should be the next move? How should one tackle the current market scenario?

 

Sajiv Dhawan of JV Capital Services believes that when one has these sort of volatile moods in the market, the safest thing for most investors is to sit on sidelines and basically not to buy. "Even we are trying to lighten some portfolios of our clients just to minimize losses," he says.

 

Technical analyst Hitendra Vasudeo too advises on the same lines. "Book profits and also cut losses wherever possible. And release losses in case one is stuck up any positions," he says. He believes it's better to be light at this point because if 12,800 gets violated at any point of time, the implications would be much bigger. He therefore suggests to be safe at this point to be light and try to release your long position exposures.

 

Bose too suggests, "After such a big fall if you go short, then chances are that there could be a spike like recovery in the form of short coverings. So unless you are carrying a short position, going short at the current levels may not be advisable."

 

"Also, in this kind of market, it's not just stoploss that will matter. Actually what you need to do is that you have to change your position sizing because in this kind of a market which is very difficult to gauge," he adds.

 

By Saba Ashraf (with inputs from CNBC-TV18)