Indian Markets

Mr.Market after 70 plus years of being called manic-depressive still continues to be so. What a drastic change in one week? Everything is so great one fine day. Suddenly, there is a sign put up that says discount sale - top tier IT companies going for 16 times earnings, FMCG even better, already discounted pharma - even cheaper. Earlier, in December, I had recommended a put option to a friend who was willing and able to take the risk. He was worried about the possibility that he would have to roll it over to the next month at a not so cheap time premium (interest, for the uninitiated). He was ecstatic that he sold his put at 75% profit one day and the next week, worried that he sold too early because the put was trading at what would have been a 300% profit.
I am in the Indian market for long-term. This might seem a contradiction to my sell statement from few weeks ago. Different times call for different strategies. When I see businesses selling for 30 times earnings, no matter how good it may be - it is underpricing of risk. If anything is certain, it is that this is an uncertain world. The overpricing of cash flows is a sign to me that it is time to sell. Why? Protection of Capital is my first priority. I would rather sell now and wait for another year or so to re-invest than count ephemeral book profit. Going by the larger trends prevailing, I would most probably not have to wait a full year before opportunities spring up.