INFLATION SCARE!!!

Inflation nos of 11.05% spooked the markets on Friday. Was it a knee jerk reaction? or was the fall justified based on the assumption that RBI would further increase rates, and hence the fear of growth slowing down. Well that is from a macro perspective, but coming to the Micro perspective, its also a play of the series. If you recall in my earlier posts I have mentioned that till the time the expiry is over, the clouds over the markets cannot be said to have blown off. The markets maximum turnovers are based on F&O dealings, and they follow an expiry cycle of last Thursday of every month. Now if the positions are build up hugely on the short side, the markets have to recede down as the players who matter would want to see the markets go down and sell heavily. The small rallies that we saw some 5-8 days back, are mere technical plays, though I still maintain that the worst is over as far as some individual stocks are concerned, cause if they fall any further, then for big institutions with big money, it would not make sense just to buy stocks of those companies but it would make tremendous sense to completely buyout those good companies at those price!!! So where do we go from here, I had commented in my earlier post that its a good time to enjoy the downtrend, but one fact that we must not forget that its a good time to buy also. The point to be noted here is that we should avoid buying when the markets are going up, infact it makes much more sense to loosen up those purse strings in days when the markets crack. One policy that must be adhered to is no matter how tempting the stock is looking at a particular price, its not worth it putting in 100% of your cash. Even you may have guessed the down point correctly but when markets correct they tend to overcorrect more than what they should, so lets say a stock that you think is a great buy at Rs 200 might be available for Rs 180 the very next day!!! So its prudent to do buy mixed with technicals in a staggered way.