GO LONG IN A BEAR MARKET

I had mentioned in this report on 11th April that we have entered in bear markets. This view gets fortified by news of Debt Funds closure. Franklin Tempelton had 40,000 cr AUM under the 6 schemes out of which 10,000 cr have been redeemed and the rest will be redeemed as and when FT receives the money from their borrowers. There could be a chance of a haircut to the investors. This means the hedge instrument itself has failed.  

This will create a ripple effect of redemptions in debt and equity and all at one go and both the debt and equity markets will crash simultaneously. This will take some time to pan out since the amount involved is large. We are taking about 7500 cr per month of SIP’s being invested in the stock markets since past 3 years consistently. This alone is a total of 2.7 lac crores. Add to this other MF’s and Debt Instruments funds.  

We all know that this investment has negative to 0 ROI . Now imagine if only 25% of this money is called for redemption as a ripple effect of this and other news flow !! Yes, there will be government intervention and other salvage efforts which will bring the markets up as a secondary move to the primary down moves of the market.  

As mentioned in the previous report, I am playing on the secondary upmove momentum. So, I am currently long on certain stocks as per my filter parameters with only 40% allocation. But working with tight Stops and ready to exit as soon as the markets indicate.