Markets will test the patience of investors and the nerves of the traders. Prudential ICICI Mutual recommends that investors remember the following basic principles:
Markets are neither cheap nor at bubble valuations. They are between fair value and expensive valuation.
The valuations are supported by the optimism about sustained above average future growth and the continuous flow of cash from local as well as global investors.
Markets will become volatile with the opposing forces of liquidity and valuation coming into play.
Markets will reward investors and punish traders.
It is difficult to predict the market except for the long run.
Asset allocation (a fair balance between risky and non risky assets) is the key to withstanding market volatility
Markets are unlikely to melt down like the TMT sector in the year 2000 as this time the doubt is with the valuations and not with the business model.
You should be a buyer in the market if you are under-invested in equity and you should be a seller if you are over-invested in equity.
Regular investment/systematic investment will be the most appropriate way to invest in the equity market