Indian Summer ?

The Indian stock market is in a bubble. When and how will it end ? My guess - soon, with atleast a 25% pullback.

But for a token number of shares, I have closed my positions in Rediff (REDF) and Sify (SIFY), with an average gain of around 200%. The ADRs are trading at a premium to the underlying shares on the BSE.

I will be holding onto all my shares in core/infrastructure/banking companies like ICICI (IBN), HDFC (HDB), VSNL (VSL) and Dr. Reddy's (RDY), though these will also retreat.

The bullishness on India has reached incredible levels - the same experts (!) who could only see cows on the roads two years ago, now seem to notice a strong regulatory/legal framework! Perception is all that has changed here.

Long term, India is still a great investment opportunity. For now, its growth will run into a major roadblock unless there is a massive overhaul of infrastructure. Ofcourse, infrastructure projects take a decade to show results.

Most of my Indian positions were opened following the scare after a change in government 2 years ago. I will now consider adding to my positions only on a significant pullback.

If you are heavily invested in India, I suggest moving some of your portfolio into Japan, China and Philippines plays.

With their recent purchases of Indian oursourcing outfits, R R Donnelley (RRD) and Electronic Data Systems (EDS), are good indirect bets on India. Among pure plays, Tata Motors (TTM) and Patni Systems (PTI) are the only ones that still look somewhat attractive. In both these cases, be prepared to add on any weakness.