Has the stock market bottomed out?

With the economy slowing down, we could still see some tough times ahead. If you have delusions of the 20-Share Index returning to 6,000 points any time soon, then you are out of touch with the market.

The volatility isn’t over and monthly returns are not guaranteed. For investors this means they need to enjoy the current rally for as long as it lasts.

However, they should also be ready to increase their exposure to long positions, since the stock market has bottomed out. Calling the bottom of the stock market is a game played by many investors.

Investors do not want to be left out, once the bear market is over and the stock market bottom is in place.

But it’s important to note that nobody rings a bell at the bottom of a bear market but there are plenty of indicators investors can monitor in the hope of predicting when a bottom might occur.

Are We There Yet?

The levels reached by the indicators at the bottom of past bear market are commonly used as signposts for current bear markets.

Unfortunately, history does not always repeat the same way.
There is always a great deal of interest in when the stock market might bottom. Many investors with a trading approach look for the best time to commit money to the market.

However, the average investor should be wary of such market timing. Studies have shown they are better off buying and holding the stocks portfolio aligned with the index and rebalancing at intervals.

A record slump

Of course, if the average investor can start investing or rebalancing in the depths of a bear market, this should enhance long-run returns.

The next bull market rally has begun and there are bargains in every counter at the NSE following a record slump in stocks prices.

Investors have to be careful not to miss the opportunity but with all the negative news — global financial crisis, slow economic growth, high inflation rates, food crisis and wrangle in the coalition government there is a tendency to hold back.

Institutional and retail investors should be looking for companies that are cash-rich, have low debt and higher dividend yields, or those that can invest for future growth, yet have cash left to pay shareholders.

But still investors are advised that they are going to see a lot of bouncing off the bottom because there’s a tremendous amount of uncertainty in the market. But I have a feeling we are at the bottom and now building a base for the next bull market.

But let me quickly point out that no one can call the bottom in the stock market. No one has managed to do it. But it’s important for investors to think long-term.

The writer works with Sterling Investment [email protected]