Mkt Watch: The bounce is back, but still tread warily

Now that the big bust has come and a bounce is also in place, maybe it's time for some serious tactical rethink, writes Udayan Mukherjee.

Nothing looks quite as awesome as a post selloff rally. It almost feels like the pain never happened and that we are on our way to new highs soon. It's even easy to get carried away. Sadly, things don't always flow so linearly. Now that the big bust has come and a bounce is also in place, maybe it's time for some serious tactical rethink.

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First, while the bounce in some of the massacred stock futures is huge in percentage terms don't get lured into the same trap again. Having fallen 50-70 per cent there's nothing unusual about them bouncing 25-30 per cent from the lows. But for those stocks which have little by way of fundamentals, this may be the perfect opportunity to exit for people who had the staying power to hold till now. It's best to train one's sights on top large cap names which have fallen with the market and solid midcaps which got sold down to generate cash for margin calls. There are plenty of them around. Also, while value has emerged in sectors across the board, it may not be prudent to chase stock prices on days of strength. Despite the pullback, I think there is more volatility which lies ahead. While the mindset should be one of being opportunistic on the buying side, a patient and staggered approach may be wiser. Over the next days and weeks it is possible that you will get your stocks at prices you like so the idea is to chip away at them on all bad days. Once a portfolio has been created around these difficult times one needs to just hunker down and wait, the returns will come.

Executive Editor, CNBC-TV18