Yesterday, the markets touched historic high and came out of teens with sensex touching 20000. Along with this, nifty touched 5900 and appears raring to cross 6000. The 700 point plus rally was one of the five biggest rallies in countries history.

In this Bull Run period of about 5 months, I have seen many people joining the share trading stream, some of them at the cost of their own business.

Have they taken right decision? Would they be able to make money and stay invested? Before attempting to answer this, let us first look at what is driving the market and ponder over few points.

 How this Rally is better than previous ones?

1. The rally is driven by select stocks. Even yesterday when the rally was third largest in country’s history, market darling infosys did not move. Only top 6 stocks contributed to about 90% of the gain. This means market is rewarding the performers only, unlike when even junk scrips moved.
2. Small and midcaps moved only 2%
3. Cues from Asia and other markets are great. Indices in other countries too scaled their peaks.
4. There is note of optimism in the market with heavy premium of futures.
5. Manufacturing is moving from US, Europe to Asia and so are investments. These markets hold greater promise.

 Negatives of the rally 

1. The market is being governed by select investors only. Their exit to manipulate the market could lead to major losses, may be temporarily. If you don’t have holding power, this period is not for you.
2. Uncertainty of mid term polls could lead to major losses, say up to 2500 points.
3. Sudden surge in the market create “new millionaires” who would like to translate their paper earnings into cash and some money then flows to other sectors as housing or automobile.
4. Any temporary losses could drive away new investors.

 So what should be the strategy? 

1. Avoid mid caps or small caps
2. Don’t invest in any sector, rather invest in a company. In the short run, you may be a loser following this approach, but in the long run, it would you off handsomely.
3. Invest in stocks that have consistently performed and rewarded shareholders.

A correction of about 1500 points could be in the offing, so but at sensex of 18500 levels, and but Reliance, L&T, RPL, Suzlon, at every dip beyond 18500