What to do with the markets now?

A lot of you have been asking me on this. My view has drastically changed over the last 4 months or so. While I used to be a guy on "valuations", "PE", I have come to realize that there are phases of the market when we talk different things. The phase of the market when we talk valuations is usually during the steady phase. Market valuations determine what is a relatively inexpensive buy and what is a good long term prospect (3-5 years). The phase of the market we are currently in is the "mania" phase. In this phase "valuations" are thrown out of the window and the market gets into true "animal spirits". Here we need to rely on trends and charts (see Ashu Dutt on ET Now in the mornings). And trends will help you decide two things - stocks to buy for a short term (less than 6 months) and more importantly when to "sell". The FII inflows in the market is huge primarily because of low interest rates in the West and Japan. And this is hedging it in India for a growth. The flows have entered "mania" proportions.

The current mania is concentrated on Financial Services, so the rise is there. Look out for stocks which have a low float and a lot of dormant investors - like LIC or Government. If there is a demand for these stocks, which there will be in a mania, then they will shoot up drastically. PSU bank stocks, PSU insurance, PSU Non Banking companies are good stocks...watch IDBI, IDFC, State bank siblings, Vijaya Bank, etc. So as Ashu says, enjoy the party; but make sure you get out by 2 am, else you will get a bad hangover...happy investing!!