Bulls repeat the Bear act

Today Bulls made a grand comeback and did exactly what bears did yesterday i.e. kept on hammering the other side as if there is no tomorrow.

Was the bounce unexpected? Not really. But that’s about it. Oversold bounces are always difficult to time as they are very sharp; and rarely give an entry opportunity.

Nifty intra-day Chart

With today’s bounce, Nifty has practically recovered the complete loss that happened yesterday.

1. Nifty started the day with big bang gap-up opening, compared to yesterday’s close.
2. But then yesterday’s nervousness crept in and pulled the market down to 4580 in the morning for brief period of time. That’s about it.
3. Bulls then took the market in their control and there was practically one way ride in the market from 4580 all the way to 4620 without any meaningful pullback.
4. Technically, Nifty has created a support at 4680 atleast for near term

Nifty finally closed the day with 3.2% gains. Nifty spot recorded high of 4718 and low of 4565.

Nifty 5-day Chart

The 5 day chart clearly illustrates - extent of recovery and potential. Now, as long as Nifty is above 4680 - it can aim for 4850. But considering, the one way ride - Nifty had - any meaningful correction can bring in panic and nervousness. So, we are still in shaky UP and down market.

Nifty Daily Chart

On daily chart, Nifty has printed a strong reversal on the chart. Considering how oversold the market is, there is probability that Nifty may continue with bounce to 4850. Global cues might help.

Where do we go from here?

It depends how we want to interpret this rally.

Scenario 1- If what we are witnessing is just an oversold bounce, then this rally can extend to 4850 to clean up the shorts, but then around 4800 - fall can be equally sharp.

Scenario 2: Nifty consolidates and absorbs selling between 4600 and 4750 - builds a base and then moves upward - then only, the next leg of rally can be more sustainable one.

We are right now in Yo-Yo kind of market and such markets can make you nuts as they can wildly move from one end to another effortlessly

Bears damage the charts

What is the lesson after today’s sell off?: If you have to panic - panic early.

Nifty has been on one way ride and that is down. In last five days, it has lost 400 points in a straight line. Technically, it has broken major support levels be it moving average or horizontal support line. So, the big question: Where do we go from here?

A. Oversold Bounce OR B. Relentless Selling……….I wish if we knew

Nifty intra-day Chart

Today was a day when morning HOPE of market holding 100 dma turned into nightmare for most investors.

1. Nifty started the day around Friday’s low of 4687. It formed a double bottom near 4670-4675 and rallied to 4730.
2. But that was it as far as rally was concerned. Nifty then tumbled below 4700 and after some brief attempt to hold 4675-4680: the bulls gave up
3. This was the time when bears took complete control of the market and Nifty made a one way slide from 4675 all the way down to 4540
4. The way it sliced 100 dma without any fight - makes that moving average irrelevant.

Nifty finally closed the day with 3% losses. Nifty spot recorded high of 4730 and low of 4538.

Nifty 5-day Chart

The 5 day chart clearly illustrates - how Nifty has just sliced through all levels without any fight. Technically, Nifty is oversold but that does not guarantee any bounce. Nifty is below all major support levels and hence every rally will get sold.

Nifty Daily Chart

On daily chart, today was the 11th consecutive day when Nifty closed in red.

I don’t remember when was the last time, Nifty saw this back-2-back days of selling. The 100 dma now stands at 4628; and 50 dma is at 4848.

Where do we go from here?

It depends. Today, it smacked off like climax selling. Most of the high beta stocks have got too extended on the downside.

There is a saying: HOPE is a four letter dirty word in the market. Since, market has closed in deep red, it would be advisable to wait on the sidelines till clarity emerges. My gut feel tells me: that by tomorrow evening - Nifty will be ready for big bang bounce to 4850 to clean up the shorts that have got piled in the system.

Please note, there is nothing to suggest any strength as of now. I have a feeling based on watching the market - Nifty will first rally to 4850 before tanking again to 200 dma. It seems unlikely that Nifty will just one way go down to 200 dma since all those who had to panic have already panicked.

An anatomy of the Stock Market! - Bull & Bear Market Cycles

In financial markets, the “majority is always wrong.” When the investing majority or the crowd is overly bearish, this is the best time to be buying stocks. When the crowd is overly exuberant, this is the time to be selling stocks. The financial markets work in this ironic way because not everyone can win in the market.

The Start of a Bull Market

The bottom of the market starts at a time when the stock market is weak and the general population is pessimistic. At this point most investors sell after having endured a long and torturous bear market. This extreme pessimism found at a bottom is always irrational and undeserved. Now the market is undervalued and is a bargain. Savvy investors, the “smart money”, buy bargain stocks knowing that they will be able to sell them higher in the near future. Smart money buying, called accumulation, causes stocks to rise.

The smart money often consists of operators, and corporate insiders (promoters of companies). These traders have access to information that the general public does not.

Rising stocks eventually gain the respect of institutional investors, as billions of dollars of capital is introduced into the market place. Mutual fund investment causes the stock market to advance in a powerful manner. Much of the steady large trends are powered by institutional investors. After the stock market has gained, stocks are now fairly valued and are no longer considered bargains. The smart money is now sitting on a large profit, as well. The average investor is still skeptical, however.

As bull market events unfold, retail investors begin to take interest in stocks. Retail investors, or the unsophisticated little guy, make up the vast majority of investors. This group does not invest for a living. Retail investors often make investment decisions based on what they read in financial magazines, from their brokers and from tips from friends. As the flood of retail capital is invested, the market soars, causing great euphoria. At this point in the cycle, many companies become public, or launch an IPO. Companies go public when investor sentiment is most optimistic so as to gain the highest possible stock price. IPO’s generate even more optimism as unsophisticated investors buy into the fallacious thoughts of instant riches. Now is the time when many small investors become wealthy. In this phase, stocks are doubling and tripling as the media cheers on the advancing bull market.

At this point, the smart money sells, or distributes, the now overvalued stocks to overconfident retail investors. The smart money knows that overvalued stocks are no longer worthy investments, and will soon drop in value. Widespread greed always occurs, in some form, at stock market tops. Sometimes this greed takes form as stock market scams and fraud. These immoral activities can take place because irrational retail investors will buy a stock simply because it is glamorous. To compound the problems, investors will now start to use margin, or leverage, to further accelerate gains. All caution is thrown to the wind as investors think “the old rules don’t apply”.

The Start of a Bear Market

After mutual funds and retail investors are fully invested, the market is overbought. This means that there is no more cash to fuel the rally. The market can only go in one direction: down. All it takes is just a hint of negative news and the market collapses under its own weight. Investors quickly realize the market is made of smoke and mirrors, as frauds or other scams come to light.

When panic selling starts, a market will always fall quicker than it had risen. Oftentimes, as everyone heads for the exit at the same time, there isn’t anyone willing to buy the stock. This can be especially disastrous for margin users as they grow deeply indebted to their brokers. Bankruptcy is the usual result for these foolish gamblers. The majority of retail investors don’t sell even as the market is plummeting. This crowd keeps holding on to stocks in hopes that the market will recover. As the market plummets 25%, then 50% the average retail investor foolishly holds on, in complete denial that the bull market is over. Finally retail investors sell every stock they own plummeting the market even further. This mass exodus is called capitulation.

The Cycle Starts Again

It is at this point that stocks are undervalued once again. The smart money is accumulating and stocks rise. The majority of retail investors bought at the top and sold at the very bottom. This is the very essence of the “dumb money”. They are perpetually late into the game. This cycle continues over and over. Only the smart money actually “buys low and sells high”. After trading in this manner, the dumb money will adhere to adages such as, “the stock market is risky”. In reality, however, the stock market is only risky if you trade like the mindless majority!

Observations(nifty/sensex):-

1) Monthly charts at all time high
2) Momentum indicators in weekly charts showing overbought levels or prices falling below 30 week average
3) Prices falling below the 200 day moving average or below the two-thirds fibonnacci retracement of the primary market trend
I don’t know how much fibonacci applies to weekly charts in this respect

Following the ripple, wave, tide syndrome, you probably identify the tide change by looking at the monthly/weekly charts and look for intraday turnarounds beginning with looking for bearish reversal patternos on 30 min charts?
I should add that When the market peaks and one wants to sell, one can apply a 20day moving average as a trailing stop loss.?

One can always get further intellectual satisfaction by tracking US interest rates, FII and mutual activity etc.

For identifying market bottoms, it would be reverse of the above. I have always been fascinated by how investors use technical analysis and traderji has come with a really good post. However unless we have specific and correct pinpointed information, such posts cannot stop trailing losses to us small,little,tiny investors. Its David v/s Goliath and you gotta support the underdog.

I am not much of an expert at all this and so any corrections would be as welcome as corrections to primary trends are to detect a new trend. Weekly specifications of stochastics/RSI and others applicable also would be appreciated.

Come to think of it, I have not seen any monthly chart attachment on any of the posts and weekly chart also comes in once in a blue moon. Anybody wants to criticize what I have written or contribute anything on Techincal analysis for investing, please do so. Sometimes, TA seems better at timing investment profits then following the short term hocus pocus. However TA itself is a conglomerate of indicators and so the more precise and clear the info, the better. Lets create a new trend for the small guy. If we create understanding, the small guy will no longer remain a puppy between the bulls and the bears.

The relief rally in the bear market is close to finishing

There certainly is more liquidity in markets and that has helped the rally in Asian stocks.

Chairman of securities house CLSA Asia Pacific Markets Rob Morrison shares his views on the Indian and global markets in an interview. Edited excerpts:

Where have the global equities reached after the last three weeks?

I would certainly sit in the camp of those who believe that the relief rally, and I think it’s a relief rally, in an overall bear market is close to finishing.

What makes you say that the trend has not turned?

Hopeful: CLSA’s Rob Morrison says he does not expect Asian markets to retest their lows of last year.Ramesh Pathania / Mint

If you look at the valuations overall, and CLSA’s universal stocks that we cover, we are currently sitting at 17-18 times 2010 earnings. That is fully priced, particularly as there is certainly no absolute transparency on the 2010 numbers and there is certainly some potential for some downward surprises on the 2010 numbers. So 17-19 times earnings you have got to say is taken—that the good news is there. I really don’t think that this rally will last much longer.

If the rally is propelled by liquidity and momentum, do you think there is more left in that liquidity gush?

There certainly is more liquidity in markets and that has helped the rally in Asian stocks. There is no question about that. When you sort of return to greater liquidity, liquidity goes looking for the best investment stories. And our view, CLSA’s view, is definitely that Asia remains the best investment story—short-term, medium-term, long-term—Asia remains the best investment story. So, with additional liquidity, that did help spur markets over here. But they have all had very strong rallies. So liquidity plays a factor in terms of keeping markets moving, getting them started. But it doesn’t sustain them. As I said before, I think that the numbers based on 2010 numbers, these markets look fully priced.

What will trigger off the correction?

I think there won’t be a single event; there is no single trigger there. It is more, as you said, that people understand that valuations are now starting to get stretched.

There is going to be a series of events. I would expect most of those events to focus around Europe. I think the news out of Europe in the months ahead won’t be positive. And that is probably going to put pressure on equity markets.

(Has the market hit) bottom yet... Are you talking about S&P or are you talking even about Asia?

When I said we have not seen the bottom, I was talking about economic fundamentals, or economies. I don’t think we have seen the bottom in terms of some of the key asset prices. For example, housing in the US, I don’t think we have seen the bottom there. We certainly haven’t seen the bottom in Europe yet.

In term of the S&P, as a house CLSA, our view would be it probably peaked somewhere close to that 1,000 number, very close to that at the moment. And then, if that is the case, you would probably be picking numbers around 500-580, something in that sort of vicinity. I don’t think—and to be fair, as a house, it surprised us—the impact on Asian markets through 2007-08, I don’t think we go back to test those lows on Asia. I think there are good reasons why we shouldn’t go back and test those lows. But who knows, last time I didn’t expect Asian markets to react as badly as they did to what was happening in the US. But my expectation would be that Asian markets don’t retest those lows.

How much probability would you attach to the event or likelihood of India going back to its old peak sometime in the next 12 months? Even if there is a correction looming right now, do you think in the next 12 months we can get back to the Sensex highs of 21,000 points?

Not in the next 12 months. Some of the things that will help move the macro economy picture in India would be the pick-up in capital expenditure. I think there is a great deal of capex at the moment. A number of Indian companies were waiting until they have seen the outcome of the election. Also, there have been obvious issues around funding. But I think, with the election out of the way, you will see a pick-up in capex spending, you will also see greater spending from the government... That’s all going to help through 2010, but I don’t think that’s going to fuel a strong equity market rally... But 2010, I think, will be a very good platform for future investments...

Bulls Finding It Difficult To Roll Over Long Positions In Futures To The July Series

Bulls Finding It Difficult To Roll Over Long Positions In Futures To The July Series

AT LEAST seven out of 10 people on Dalal Street are bearish/neutral on the market. The general perception is that valuations have become pricey, and those with high expectations from the Budget will be in for a major disappointment. And though bears clearly outnumber bulls at this stage, a steep correction in stock prices before Budget seems unlikely, say market watchers. That is because bears are unwilling to back their words with actions this time around, having suffered heavy losses in the week, following the election results.

An immediate fallout of this approach is that bulls are finding it difficult to rollover their long positions in the futures segment, to the July series. In a rollover, traders square-off their current month positions, and take up an equivalent position in the next month series. "Liquidity is tight in the July series (of futures); clearly there aren't enough traders willing to go short on the market," said a dealer at an institutional brokerage. In the run-up to the elections, most traders had sold short in anticipation of a hung Parliament. Their bet was that stock prices would crash after the election results were announced, allowing them to make a neat profit by buying back their positions at lower levels. But with the verdict clearly in favour of the UPA, markets surged in the following weeks. Bears suffered bruising losses, as they were forced to cover their positions at prices way above they had sold at.

"Bears are very cautious this time after last month's experience," says Birla Sunlife Insurance chief investment officer Vikram Kotak. Mr Kotak expects the market to find support in the 12000-13000 band, but does not expect it to cross 16000 anytime soon.

Brokers said some of the leading market operators have unwound their long positions over the past one week, but are not going short on the market. And it is not just traders who are treading carefully. Brokers say fund managers too are wary of booking profits before the Budget, unless a stock is hopelessly overpriced.

Most fund houses had to book profits in the run-up to the election results, and ended up severely underperforming their benchmark indices when share prices soared later. But while they are not selling actively, they are not loading up on shares either because of concerns over valuations.

20 Year Bull + Bear Market Duration

Will the current 14 week rally fizzle out ? here is a Graph which shows historical data from 1990 to 2008 on the duration and Rise / Fall of SENSEX during Bull / Bear market.

So do we think this rally will end here ?

We do not know if this will be the case. Indian markets have materially outperformed, emerging market returns YTD. But this has happened repeatedly in the recent past.

We are concerned that the Indian market has moved up too much too fast. But we believe resistance is futile. It is extremely unusual for a market's rally to fizzle out so soon. The average bull market in India lasts for 53 weeks. In a world beset with an ever-increasing speed of response, such moves might be shrunk and play out over shorter periods. But 12-14 weeks is just too short a time for a market rally to end according to the above data.

Ya, I know it is extremely confusing as earnings don't justify the market levels yet.

Nine stocks that withstood the bear market

While the recent bear phase left the valuations of all listed companies in ruins, there were a few stocks that defied the recession and managed to hold on their own steam.

We drew up a list of these stocks and also identified the mutual funds which managed to spot these and held on to them through the tough times. For this, we looked at the 500 stocks which comprise the BSE 500 index over the bear phase commencing January 8, 2008 to March 31, 2009.
Stocks that stood firm

Of the 500 stocks under review, we found mere nine scrips which stood firm during the market mayhem. These are: Hero Honda, Shree Ashtavinayak Cine Vision Ltd, Lupin Ltd, Cipla Ltd, Castrol India Ltd, Nestle India Ltd, Hindustan Unilever Ltd, GlaxoSmithKline Consumer Healthcare Ltd and GlaxoSmithKline Pharmaceuticals Ltd.

Hero Honda Motors, as on the first day of this phase, was quoting on the Bombay Stock Exchange at the price of Rs 690.10 and climbed to 1,070.15 by end March 2009, growing by a whopping 55.07% on an absolute basis. It wasn't smooth sailing for Hero Honda Motors as the gloom surrounding the auto sector imposed its share of edginess in prices till October 2008; however beyond that there was a consistent rise in quoted prices.

At the same time, Shree Ashtavinayak Cine Vision, Lupin and Cipla grew by 19.55%, 13.03% and 5.06% respectively. In the case of Shree Ashtavinayak Cine Vision Ltd, prices rallied from the last week of January 2008 to the first week of August 2008, thereafter the scrip witnessed a drop in prices till October 2008. Since then, it has again displayed consistent growth in prices.

On the other hand, GlaxoSmithKline Pharmaceuticals has had a tough time with large fluctuations in the movement of quoted price; the scrip did manage to remain in the green with a marginal gain of 0.29%.

Who picked them?
Here comes the tricky question. Which schemes managed to pick these stocks? We looked at only the schemes that held these scrips consistently during the bearish phase for a period of at least 12 months of the 15 months under consideration. Surprisingly, only 17 schemes of the 367 schemes (includes all schemes that invest in equity including hybrid schemes barring index funds) invested consistently in Hero Honda!

In fact, Shree Ashtavinayak Cine Vision, which grew by 19.55% in the bearish phase, was not picked by any of the fund houses. Shree Astavinayak Cine Vision has a market cap of Rs 561 crore (as of May 27, 2009), and over the quarter ending September 2008 and December 2008, the company showed a growth of whopping 551% and 498% respectively in net profit. However, prior to quarter ending September 2008, the company consistently witnessed a loss for three quarters, which is possibly the reason why funds stayed away from the stock. On the valuation front, based on CMIE data, the stock is currently available at the price earnings (PE) ratio of 28.37 times which is significantly higher than the PE ratios of BSE Smallcap (13.05 times) and BSE Midcap (15.86 times).

We also looked whether these schemes which managed to pick maximum number of these companies performed well. In the tax-planning category, the stock picking clearly worked in favour of these schemes. However, in the equity diversified category while most of the schemes managed to make it to the top quartile, three schemes could not translate their stock picking benefits into better performance. But, for most the stock picking was beneficial in keeping losses low.

The road less travelled
It is at times like these that stock picking assumes greater significance. It is for the fund management team to sift through and discover such gems and have enough conviction in their performance. Therefore, getting a sector call right is not enough; within these, picking the right driver is of more importance.

Having said that, while some of these companies may look like obvious choices that an investment manager would be reviewing, the past performance of these companies on the bourses shows that spotting them was not all that simple a task. In 2007, out of these nine stocks, Castrol India, with the absolute returns of 58.24%, was the only stock which outperformed BSE Sensex.

While scrips like Hero Honda Motors (best performer in bearish phase), Cipla, Hindustan Unilever and GlaxoSmithKline Pharma even faltered in 2007. Lupin grew by only 3.53%. Shree Ashtavinayak Cine Vision was listed only in the middle of 2007. GlaxoSmithKline Consumer Healthcare and Nestle India rose by around 32% in 2007. The performance of some of these firms was also not very inspiring over the previous few years either.

At our end, we look forward to investment managers picking performers with a better frequency than they have. The numbers reviewed here are not very inspiring for an investor.

Defensive Safer Stocks In Bear Market

Investors should invest in defensive stocks in a downturn. These stocks tend to perform better during a recession. Defensive stocks remain stable through the various phases of a business cycle.

They, however, tend to under-perform during an expansion phase. They earn profits regardless of economic gyrations because they produce or distribute goods and services always needed, such as food, power, water and energy. Share prices of stocks within defensive industries tend to grow at a relatively stable rate that can often be predicted with some degree of accuracy, based on historical trends. Some of the defensive sectors you can invest in:

Telecom
One sector that is bucking the trend of constant negative news is telecom. Telecom is adding on consumers at a breakneck speed. The figures released by the Telecom Authority of India (TRAI) for the month of October show an unprecedented 10.5 million users added. The mood in the telecom sector seems upbeat despite the slowdown in the economy. During 2008, the telecom sector has grown at 33.4 percent as compared to 35 percent in the previous year. There is a slight dip in the figures this year. However, when compared to the growth figures in other sectors, it is way ahead.

Mobile 3G services are expected to roll out in the country by March 2009 and Wi-Max auctions too would be completed by the end of January 2009. Analysts say rural telephony, 3G, WiMax and data services will drive the sector's growth up to 2012. In 2012, 3G services would have just begun to spread in India and mobile entertainment and mobile banking are likely to be the biggest drivers for data services. The total telecom subscriber base is expected to reach 690-700 million by 2012 to include 640-650 million wireless users and 45-50 million fixed line users.

Engineering and capital goods
The recent slowdown in the industrial sectors may impact growth momentum of the capital goods sector in the short term. However, the infrastructure development package announced recently holds promise for engineering companies. The order books of many companies in this sector are strong, leading to visibility of earnings in the near future. There has been a growing consensus among policymakers that a private-public partnership is required to remove difficulties concerning the development of infrastructure in the country. This will lead to larger participation for private sector companies in large infrastructure projects.

The gap between supply and demand for power increasing. So, power equipment companies can look forward to increase in revenue from power generation and distribution, as the government will be forced to augment the supply side. There is a thrust on development of new wells and improvement of output from old wells in the oil and gas space. This will lead to more projects for engineering companies.

Oil and gas
There has been a radical change in the government's approach to E&P (exploration and production) activities in the country. In order to enhance the energy security of the country, the government has increased its thrust on exploration, leading to substantial investments in this sector. All these investments have yielded results in the form of discovery of oil in Rajasthan and gas in the KG basin. Thus, post-2009, enhanced production of oil and gas in the country will be seen. The demand growth for oil and gas will outperform supply growth for some time to come.

The unmet demand for natural gas in India is estimated to increase from about 113 million standard cubic metres per day (mmscmd) in the financial year 2008 to 396 mscmd by the year 2022. Demand for petrol, diesel and jet fuel are expected to grow at a compounded annual rate of 1.7 percent, 2.5 percent and 2.2 percent respectively till 2010. The medium-term outlook for refining margins looks positive, due to robust growth in demand.

FMCG
The FMCG companies are showing resilience in the face of the economic slowdown. The sector had witnessed higher sales growth in the inflation environment. Farm loan waiver, satisfactory monsoon and employment generation schemes have put money in the hands of the consumers to spend. Hence, the longterm fundamentals of the sector, both in terms of breadth (number of consumers using) and depth (existing consumers) continue to remain strong.

With the cooling of commodity prices, FMCG companies have further reason to cheer. Products in categories like coconut oil, oral care, skincare products would benefit with the reversal of commodity prices. As the sector has a domestic focus, the possibility of an impact of the global slowdown on these companies is limited.

Safe Best Stocks To Invest In 2009 Recession

My goal in this and the next coming posts is to address typical questions which come in the mind of an investor like you and me: What are the best stocks to buy right now? What are the best investment strategies? etc. I hope that these posts will help us to take informed decisions for investing in 2009.

What are Best Indian Companies to invest in 2009?

I will quickly give a list of best indian stocks, perhaps i should say stocks which I think are best and more importantly safe for investing in 2009 and beyond. I will be posting a a more detailed analysis of each of this stock one by one in the coming month. To know more about each stock click on each link below to know more. If a link is not available yet, it will soon be.

1. GSK Pharma or Glaxo : Best Pharma Stock to invest in 2009
2. Cipla : Good Stock, Pharma Stock - currently slightly overvalued?
3. Hindustan Unilever. : Best FMCG Stock to invest in recession (Market leader)
4. Nestle : Good FMCG Stock
5. Tata Tea : Best FMCG Stock for investment, currently available at an attractive price.
6. Britannia : Good FMCG Stock
7. Marico : One of the best FMCG stocks, with high growth.
8. Dabur : Good FMCG stock
9. Titan Industries : Market leader - best Indian watch company - good long term investment option.
10. Hero Honda : Good Auto Stock- best for long term investment especially since prices of petrol are low and interest rates are falling.

What are the Safe Sectors to invest in 2009 recession?

In a recession sectors like Real Estate, Retail, Metal etc. take the most hit. They are very risky sectors when you know the outlook for the economy is not good. As opposed to this there are two main sectors which do farely well even in ups and downs in economy. These two sectors are

1. Pharma : Pharmaceutical companies - medicine making companies - are relatively insulated from sharp downturns, simply because of the logic that even if you dont get salary increments or are short of cash, you wouldn't stop buying medicine, would you?
2. FMCG (Fast Moving Consumer Goods): These are consumer goods which are required on a daily basis - for e.g. toothpaste, soap, oil, etc. These goods being daily necessities, are relatively less affected in a recession when consumer sentiment is at very low.

Here are two FAQ or rather two Frequently Imagined Questions: If you have more questions, please discuss in a comment.

1. Are the above stocks best in the sense they will guarantee 100% profit on investments? - there is no such thing like guarantee in stock market investments. The above stocks are top stocks or best stocks only in the sense that seem to have a high chance of surviving the market onslaught.
2. Are there no best stocks from other sectors like real estate? I think other sectors like real estate are horrible investment options for 2009, especially in India because real estate prices are falling and they probably wont reach any bottom until the dawn of 2010. Perhaps 2009 end or later would be the best time to reconsider investing in real estate or auto stocks.

Value averaging helps achieve investment goal

Value averaging is an investing strategy that works like rupee cost averaging in terms of steady monthly contributions. In value averaging, the investor sets a target growth rate or amount for his portfolio each month, and then adjusts the next month's contribution according to the relative gain or shortfall made on the original asset base.

The main goal of value averaging is to acquire more shares when prices are falling and fewer shares when prices are rising. This happens in rupee cost averaging as well. Over many annual timeframes , value averaging can produce higher returns.

One major potential pitfall with value averaging is that as an investor's asset base grows, the ability to fund shortfalls can become too large to keep up with. One option is to allocate a portion of assets to fixed income funds, and then rotate the corpus in and out of equity holdings as required by the monthly targeted return. This way, instead of allocating cash in the form of new funding, it can be raised in the fixed income portion and allocated in higher amounts to equity holdings as needed.

Have ample funds during bear market phase:

Identifying the top and the bottom of the market is impossible . However, varying the amount of money to be committed could help investors .

Most investors are familiar with the concept of rupee cost averaging or systematic investment plans of mutual funds, where you invest a fixed sum at regular intervals . Value averaging is a more evolved concept. Here, the investor is expected to adjust the amount to be invested in tandem with the direction of the market - up or down - to achieve a prescribed value of the fund.

Investors should put in more money when the markets are at a low and park their funds in safe instruments when the markets are volatile. It must be borne in mind that the same money will be used by investors when equities fall. It is to be noted that one needs to have ample funds during a bear market phase.

Invest when market shows a downturn:

When the stock market is in a downturn, it is a good practice to increase contributions to your investment accounts, thus buying more shares at a lower price. When the market has provided a high return, it makes sense to scale down contributions, buying fewer shares at the higher prices.

For example, suppose an account has a value of Rs 1,000 and the goal is for the portfolio to increase by Rs 100 every month. If, in a month's time, the assets have grown to Rs 1,010, the investor would fund the account with Rs 90 worth of assets. In the following month, the goal would be to have account holdings of Rs 1,200.

If in the third month the value is Rs 1,310, nothing is to be invested. This pattern continues to be repeated in the following month.

Tips for investing strategically: In this illustration, one should invest the Rs 100 that is not being invested in the third month due to a rising market in a safe instrument or keep it in a savings bank account to earn interest rather than spend it. You invest more when the prices fall and less when they rise. In other words, you buy more when the prices are low and you end up investing less when the markets peak.

With value averaging, you first figure out how much money you will need to accumulate for a goal such as retirement . Then, based on the annualised returns you expect to earn on your investments , you figure out how much you must invest each month to achieve that goal.

You should go through this process each month. In months where you fall behind , you would add to the amount you invest each month. And in months where your returns are higher than expected and your portfolio's value gets beyond where it needs to be, you would scale down your monthly investment , or even possibly end up selling some shares.

Plan investments systematically:

There are various ways to carry out this strategy. Instead of adjusting your investment amount each month, you could recalculate it every six months or every year. It provides a much more systematic way of reaching a specific rupee goal.

Since you are monitoring the value of your portfolio, you know whether you are on track and, if not, exactly what you need to do to get back on track. If the market goes into a prolonged slump, or if you simply overestimate the returns you can earn, you could end up having to make very large contributions to keep your account value on track.

Also, it does not give you any real control over the returns you earn, which is determined by the markets. The strategy may be able to lower the volatility of your portfolio somewhat.