We have not hit the bottom!!! - Buy in phased (SIP) manner only.

In the current scenarios, one thing which we have noticed is that this time around-unlike in past bear markets a lot of my friends are waiting for stability to re-enter. It means we have not hit the bottom!!! When we see no one ready to enter the market even after stability or all the analyst says, "don't buy, don't buy!!!" think that it is the end of bear market.

Here is evidence as to why the sell-off is not over as yet?

1. The earnings reported thus far for the September ’08 quarter (306 companies ex-oil, financial and trading) show a profit growth of 5% compared to the same quarter a year ago. With demand slowing down, profit growth will turn negative in the coming quarters. There is more to bleed.
2. The other evidence is the FII sell off. The latest September quarter data of 444 companies from CNX500 show FIIs have reduced exposure further during the quarter. With the sell off from the beginning of December their ownership would have reduced further. On the other hand, the same data shows that small retail investors have increased their exposure in CNX500 stocks. This is really unwanted.
3. TV18 guys did an study & came out with an eight year cycle for Indian equities. The current cycle peaked out in Jan ’08 and suggests a bottom at 60% off the highs. This sums to 8,320 levels for the Sensex. The model also suggests a 10x bottoming for the benchmark Sensex. We are currently at PE of 11x.
4. The question therefore is not that whether the world is in a recession or not. The question to be asked it – how bad is it? John Maynard Keynes helps here. An analysis from his work suggests the same kind of situation the world was facing way back in the 1930s – The Great Depression period.
5. The other concern is the Sebi cum FM hammering FIIs. If they are cornered, as is the case with the latest developments, they might just choose to completely skip India. At this point in time, they can afford to miss the India story as funds are needed abroad for redemptions. Remember the Thailand incident. FIIs pushed the Thai benchmark index to 1,400 odd levels. When they finally called it quits, the benchmark index fell to 200 odd levels, losing 85% from peak value.

The conclusion therefore is that you can start buying but systamatic or phased manner, don't deploy all the cash at one go. When the market is bad, you get them all at valuations you never thought existed. If you’re a long term systematic investor, it’s a good time to commit a part of your investible surplus.