Book Profits, But Selectively!

Voracious bulls are at play right now and the jumping stock prices are a pleasing sight to many investors. As the stock prices and indices, both local and global, inch higher, a majority of investors and professionals are wondering if it is the right time to book out. Yogesh Supekar and Anthony Fernandes explain why the markets may have not finished with their up move yet and that it may still be a good idea to book profits – ‘selectively’ – in the current market situation

- Yogesh Supekar and Anthony Fernandes

At times like now when the fundamentals do not look that great but the stock prices are climbing voraciously, most investors get confused as to what should be the right plan of action to adopt. In such testing times, conviction is missing to put fresh money at play and at the same time the willingness to sell and get out of the market is also missing. No one wants to sell in a market with prevailing bullish sentiment because there is always this ‘fear of missing out’. In the current market rally there is a tremendous fear of missing out, i.e. what if the stock prices go up after I sell the stocks? Thus, a majority of investors are shying away from selling equity.

After the prices collapsed in March, the sentiment was extremely negative and no one was willing to take a bullish call on the markets. Bears dominated the first three months in the markets. Now the situation is such that the bears have become extinct. The market is actually finding it difficult to find traces of short-sellers in the last couple of months. The market rally has given no hiding place for short-sellers and in all probability the shorts have been squeezed already, leading to fear of losing money amongst the short-sellers. The current market situation is exactly the kind of situation that makes even the short-sellers turn bullish on the markets.