How to play the weak market

New Delhi: Weakness has finally set into the markets after a continuous rise in the past two sessions. Experts regard the fall to negative global markets. They also give advice on how to play this market now.

As the markets are at crucial high levels, experts give their views on its movement now as well as on how one can play the market.

Where are the markets headed?

Chief Economist at Morgan Stanley, Stephen Roach: Sharp correction could come about in India, if Budget disappoints.

India has benefited very well from the extremely powerful global liquidity cycle that has sent capital rushing around the world to emerging market economies; it is not just India but Russia, Brazil and others as well.

It is unrealistic to expect these flows to continue with the rate that they have been over the past year and any diminition of those flows due to a shift in external liquidity positions has nothing to do with India.

If the budget does significantly disappoint, then global investors will be very specific in registering their displeasure with potential returns in India and that could lead to a sharp correction in Indian stock market.

I do not expect that to be a case. I am confident that this government has a clear understanding of the need to present a sound and encouraging fiscal outlook for both India and broader global communities.

Sajiv Dhawan of JV Capital Services: Global market cues could lead to a 50-100 point correction, which is due but may not be sustainable.

Global cues are a bit negative, but domestic momentum is still there. We are seeing a lot of interest from retail and large investors across the board. So the domestic news is quite positive.

The Finance Minister has come out with a GDP forecast above 8%, that is very good.

I think the short sellers in the market are trying to take advantage of this level and are trying to drag the markets down, but they are not in control. The key thing is how much we read into the global markets, if we look into that then may be a 50- 100 points correction is due, but I don’t know if that is going to be sustainable.

Technical analyst, Ashwani Gujral: The euphoria is getting overdone, one never knows when a dip will come.

According to the charts higher targets do seem possible for Nifty; around 3070 and probably 3200. But there are subjective indications that the euphoria is getting overdone. I sold everything and bought some puts because you never know when that dip will come.

It will surely come, since markets have risen up 35% over the last three months.

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How to play the markets now?

Dhawan says: Be on the long side, but take profits at higher levels.

I think one has to take profits at these sort of levels and be cautious and not over leveraged, because one has already made very good profits over the last several months.

There is too much follow up buying at lower levels, so I still rather be on the long side and if I want to take profits then I still would not short sell in the market, I would rather sit on the sidelines.

I do expect volatility to be there in the next two - three days and especially before the Budget. We are advising clients just to take some profits at higher levels.

One has to be more careful because any shock or disappointment in the Budget could be a trigger for the markets to correct sharply. Retail investors who are over leveraged will take the biggest beating.

Investors who are invested within their limits as well as long-term investors won’t mind too much of a correction.

Gujral says: Book a part of your profits.

The best way to deal with this markets is that; if you put in Rs 50 and it became Rs 100, then take Rs 50 off the table and leave the other Rs 50 in the market.

Play with the market’s money, but it is time to take some profits.

Lower your exposure instead of increasing it.

I would like to see how the supports holds in the markets, there are significant supports between 2950 and 2970 level on the Nifty.

Incase 2930 beaks down then one should probably take short positions. But incase 2950-2970 holds up, one could again be long in this market but with the limited capital exposure.

I am saying this again because if people are increasing their volumes at such levels and if they tend to lose money, they will lose much more than they have made earlier. So in terms of trading you need to lower your exposure instead of increasing it.