Heard that noise? That was some big Dalal Street office celebrating. Saw those teeth flashing on TV? That was a bigshot grinning the grin of a satisfactory killing already made. Felt the ripples? Those were the waves of bull sentiment finally reaching you, the retail investor, a good four months away from the stockmarket's epicentre.

It's natural to feel left out. But do us all a favour: stop wallowing in self-pity. Even if you aren't equipped with all the trend charts and research databases that the big players have, you could venture out to make money on equities.

To bring you up to scratch, the BSE Sensex got active in May, and then soared a giddy 1,000-odd points in one of its fastest ascents ever. The rally has held good, with some corrections, the last significant one being in mid-September. The Sensex was back up, since. "Even though the market has rallied steeply," confirms Jayesh Patel, Head (Research) of LKP Securities, "there is yet lot of steam left, and those who invest even at the current levels will make decent returns."

The obvious 'undervalued' stock picks are gone. "Across the board undervaluations that were there some time back are no longer available," says Rajeev Thakkar, Head of Research, Parag Parekh Advisory Services. The easy bucks are over. However, that doesn't mean opportunities are gone. All it means is that winning now requires you to outsmart the bigshots.

What does that entail? It does not entail any financial or informational clout, despite common retail fears of the growing 'institutionalisation' of the market. It does require some sharp thinking, though, on your part. So here's the set of 10 things you can do:

1. Inform Yourself: Study everything you can get. "The most important thing is to make sure investors spend some time before spending their money," says Nischal Maheswari, Head of Private Clients, Edelweiss Capital. Business publications and websites are a must (for primary data, the markets' own sites bseindia.com and nseindia.com are quite competent). Don't leave out the electronic airwaves either. The info boom is for real; on this, don't wait for a 'red shift' confirmation (the Hubble observation that showed that the universe is expanding).

2. Pick Businesses, Not Ticker Alphabets: Go selectively for companies you have studied closely enough to recognise what accounts for their profits (a unique customer relationship, for example, based on an internal competence), and place this in their environmental context. What threatens the company's profit source? Are market conditions going its way? To what extent are supply, demand and prices under its control? Find out what the top management's goals are, and how realistic its projections are.

3. Say No To 'Tips': Never get carried away by 'hot whispers', irrespective of the source. These are typically devious rumours initiated by some schemers to mislead the naive into their trap. "Investors go by hot tips," rues Maheswari, "and then blame everybody else for their losses." Silly. Remember, tip-mongers don't want you to think for yourself. When you use your own reasoning, you win, they lose.

4. Tame Your Emotions: Greed and fear. These two emotions tend to dominate stockmarkets, and they're both your worst enemies. Greed, typical during a bull run, could lead you into an ascendant stock that's actually at its peak (with big players about to exit). Operate by price targets; if achieved, sell (nobody went broke booking profits). Likewise, it is fear that results in panic exits (during corrections). Get used to market volatility.

5. Adopt Long Termism: Understand your pick's long-term gameplans, work out the strategy by piecing together all you know, and invest in this-for, say, three to five years. But note that even a year is sufficient time for a sharp market addressal strategy to come good. Once on this plane, you'll discover that financial results are mere 'lagging indicators'.

6. Diversify Your Holdings: Diversification is the cardinal rule of prudent investing. It reduces the overall impact of fluctuations in individual stocks. So pick stocks that differ in the business opportunities they address, and perhaps even the assumptions they're banking on. See what stocks tend to rise and fall together, and try not to have too many of these banded together.

7. Look Beyond Red Herrings: Avoid microeconomic 'prospectus' naivete, and get a hang of the Big Picture context. What are the 'macro' trends that bigshots watch? Which way are minds going? Watch, listen, read. Decipher your own cause-and-effect patterns from the megabytes of raw news coming your way. Recheck your assumptions. See what the bigshots are saying-and doing. The trump up your sleeve: you're watching what they're up to, but they don't even know you exist.

8. Watch Trading In Action: Big players, since they affect prices by the very size of their deals, tend to spread their purchases over several days. You can spot these volume spurts (add the volumes on price-up days and deduct volumes on price-down days, and you have an idea if any institutional 'accumulation' is going on). Get a trend analysis handybook. You can plot a stock's prices, and calculate its moving-average over a week or month to assess its direction.

9. Play The Contrarian: If outwitting the herd is your aim, think different. You could, for example, bet on companies that are 'out of fashion', and can come back up on a longer cycle, given the gestation period of their strategies. Or on good midcap (under Rs 100 crore), firms that are still below the biggies' radar. By and large, treat conventional wisdom with suspicion; seek alternative arguments. If you think a herd is deluding itself, you can make your moves before the delusion is exposed.

10. Go Ahead, Time The Market: This takes nerve, since it's considered too risky for lay investors(See Bookend, this issue). But once you've grasped the other nine points, do go ahead and try the timing game, say, a year down-or maybe earlier. The key strategic issue is the exit decision. So figure out the rally's drumbeats, estimate its longevity (think moving-average trends), and then use your small-guy agility to strike before the bigshots do. Don't forget your trump: they're not watching you, so they can't beat you to it. The point, really, is to stay ahead of the market curve, and not lag behind it.

Glitter Guestimates
Gold has been hardening again. Is this a time for retail investors to buy or sell gold?

By Shilpa Nayak

Global gold prices have hit a seven-year high, having crossed $390 per ounce. The Mumbai gold prices? Standard gold is quoting at Rs 5,870 per 10 gm, and Gold 999, Rs 5,900-a seven-month high.

Now, gold is seen not just as an inflation-hedge, but also as a value-store of last resort, if all other assets fail. This is why the historical price chart indicates a correlation with perceptions of global economic stability. The chart has even been termed an 'echo' of sorts, given its 1970s' ascent and post-1979 peak (at $615 per ounce in 1980). By mid-1990s, however, central banks started offloading gold, and it went on a long descent. But prices have reversed lately. Is this a trend-or blip?

The current proximate cause for gold's hardening is the fear of a dollar collapse. "It is not only because gold is a dollar-denominated commodity, but also the dollar weakness reflects concerns over the US economy," says Rhona O'Connell, Manager, Market Analysis, World Gold Council (WGC), London. She describes America's "twin deficits" as a cause for "major concern", and says that some dollar-bond money has gone into gold. Dollar assets are under close watch. And if US risks are not enough, there are geopolitical headaches too.

Central banks now "acknowledge the need for gold as an internationally acceptable asset", in O'Connell's words, and are holding on to their reserves. India is an atypical market for gold-largely because of the prevalence of actual consumption demand (for wives' social security). Gold has traditionally been part of household investment portfolios, regardless of price fluctuations.

The Mumbai gold markets, meanwhile, are buoyant for other reasons, too. "The Mumbai gold market is upbeat in anticipation of a good festival season," says Madhumita Kulkarni, Manager, Mumbai, WGC. Gold retailers are busy thinking up ways to attract customers, and retail banks are offering gold loans.

But the WGC's job is to keep gold glittering. Which way will prices really go? Trend or blip?

On current guestimates, blip. Expect a post-festivity dip. So if you're in for the short-term, the time to cash out may be soon, as prices peak for the year. However, watch the world news. The greenback's on edge, and if the US doesn't shape up quickly, gold could zoom. It'd be a trend, then.