Indian Equities Getting in Bad ShapeThe global debt concerns especially in Europe and sluggish US economy is weighing on market sentiments. That coupled with alarmingly high inflation, deteriorating IIP numbers and expectation of further tightening by RBI on September 16, has made sensex plunge back under 17000 decisively.

This is a bad signal and chances of any upmove is very bleak. And if this continues for few more weeks then we may see 14000 in sensex. Keep a watch on RBI’s decision on September 16, 2011. In any case, its time to be atleast 40% in cash. Invest in FDs.

However, don’t stop your mutual fund SIPs.

Let them continue even if market falls further. Other than that, don’t make fresh investments in equities. Don’t try to average the stocks. Rather book whatever loss of profit you are making to ensure that you are at least 40% in cash.

Reduce exposure to stocks that are trading at high valuations. For example Jubilant Foods, VIP, TTK Industries etc. If sentiment improves, we’ll buy them again. But if anything goes wrong, then these stocks are like to be hit badly.

Continue to hold beaten down stocks in finance sector like banks.

Reduce exposure to IT stocks with the exception of Mahindra Satyam & Tech Mahindra.

Stay away from  Auto stocks but one may continue to hold Amara Raja Batteries.

One may continue to hold pharma stocks like Sun Pharma, Ranbaxy, Lupin etc.