Investment School: 2008-10-12

Cash is King

When you take a look at the newspapers in the morning, you see more news on "DECLINE" in almost all asset classes and if not declining , they are volatile otherwise. So where can we put your money (if at all you are left with some money after being battered with losses in markets)

In these troubled times, "Cash is King" the best way to survive this downfall is just to keep accumulating your savings bank account with loads and loads of cash as and when you get them.

Reasons for being in Cash

1. The first and foremost reason to be in cash is that you have control over your money. In current scenario markets are driven by all kinds of external dependencies and is more sensitive to global economic condition.

2.Capital Protection is a must in these troubled times and one should minimize the risk of losing his/her money.

Where to park my cash

1. The best and most safe instrument is fixed deposit. Most banks offer 10+% interest on 1 year deposit. This is the safe heaven.

2.Investors with more risk appetite can go for liquid funds,FMP and other short term debt mutual funds.

Reiterating once more, "Cash is King" is the film Name and You are the real hero if you have cash right now.

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Sensex Long Term Outlook

I would like to introduce to Investment School Readers, a very good technical analyst -Mrs. Lokeshwari .For those who read Hindu Business Line, this name should be very familiar. She the technical analyst and writes technical analysis columns every sunday and she is associated with Business Line for past several years. Those who are curious to know the various resistance and supports of benchmark indices can definitely spare some time and read through her sunday columns in Business Line.

In her recent column , she had given the long term outlook of Sensex and i would like to quote her technical calculations to our readers,

In our review in July, we had stated that, “The decline below 13700 brings the next long-term supports for the Sensex at 11,900 (50 per cent retracement of the up-move from 2001) and then 9703 (61.8 per cent retracement) in to focus. We stay with our long-term count that the current down-move is the fourth part of the long-term cycle that began in 1980. The fifth leg (upward) would then take the index beyond 25,000 again. Caveat - decline below 9,703 would need recasting of the counts.

The more difficult question is, how long would this down-trend last? As per Elliott Wave theory, corrections can extend from anywhere between 0.33 to 1.618 times the time consumed by the previous up-move.

The previous up-move lasted four years. That gives us the range between 16 to 77 months. Since the previous long-term correction from 1994 to 2003 was a long-drawn one, applying rules of alteration, the correction this time can be a sharp and swift one that ends in one to one- and- a- half years.”

In her column, she has indicated the next major support levels at 9700,8800 and ofcourse 6800. So as per technical counts , Sensex can go to 6800 given the current situations.

Note: The counts are revisited if some major changes happens in the global financial arena.

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