Nifty PE crosses 24|A statistically informed entry-exit model!

(s) #850

For time being the roller coaster has turned to musical chair. Enjoy the music and keep guessing when will the music stop, better have a chair to hang on to.:grinning::grinning::grinning::grinning:

(bharat.jain) #851

Lets consider this PE and Volatility chart. The volatility in index is seriously not for the less informed. Equity investment comes with a price, you should have substantial amount of time at your disposal to invest in equities. You should be able to research companies, keep track of cycles. I think personally you should have time, intellect, analytical abilities to invest in equities or you can hire adviser (getting a good adviser is not easy either) who do that on your behalf but still you cannot escape volatility. One year the portfolio have x value other year x/y and next year x*z. And then the year when your portfolio falls x percent that year inflation would have reduced it by x-7%

Business cycles are getting shorter and shorter, to keep up to that you need lot of reading. Most people in this forums are looking for multibaggers and have nothing to do with business. They are just trying to catch on the cycles and make money. FD investing comes with peace of mind and mind the fact that inflation arbitrage was not so bad for FD investing until 2008 when things start changing across the world.

As Kumar Saurabh put it my also last post will check this again at End of 2018.


(phreak) #852

There is talk of taxing LTCG. Last year I distinctly remember the market throwing a hissy fit before the budget just at the thought of that. This year it looks more and more like becoming a reality. If LTCG is moved from 1 year to 3 years, I think average holding period of equity may go up even if there are near-term corrections. Let’s see how it plays out.

(manivannan.g) #854

I don’t think the LTCG is possible this time due to the upcoming elections in 2019. Surely FM won’t take such decisions before elections. If he does, we can see a healthy correction. IMHO, next year there’s a high possibility of correction and could be a tiny black swan event if BJP loses. Otherwise, the only trigger for bear is earnings disappointment (this is purely my opinion).

(Anupam) #855

I am also a reader of IREF, a forum on real estate. During 2010 till 2013, one thread that had max discussion and constant buzz was RE bubble and correction. And it did happen. 4 years since , I find participants reduced to 1/10. Looks like a barren street in curfew. Also even now discussions range from equity, to politics to music & everything other than RE.

I see similar buzz in this thread, no doubt we are in high valuation, melt up or pre bubble zone. However timing of that is beyond my capability to predict but sooner than later correction seems impending.

(Bheeshma Sanghani) #856

Dear @Mandbudhijaat

Kindly restrict comments to the topic and avoid personal comments.

(Amit Jain) #857

Market is bullish, no matter what anyone says.

However, you probably mean that inspite of these expensive valuations when I decide to buy, the market will turn bearish because bear markets start when last bear turns to bull. I hear ya!

Nevertheless, it would be a pity if I forget about how important the buying price is for success as a long term investor. Abysmally pitiful, I’d say.

(jstocks) #862

Why is no one here is commenting on the World bank report?

(maheshkumar) #863

Trigger to sell by U.K. Pension fund

(Kumar Saurabh) #864

When facts change , I change opinion . :slight_smile: But still not here to bore but just adding some latest data of last 30 days to substantiate the fight between hope and reality . One by one , all leading indicators of economy improving . However, they are not all numbers and this is just one month of data. Need more indicators with more months of data to stabilish n fuel continuation of hope and ultimately all this has to turn into EPS . However, with points highlighted by group 1 accroding to previous post of mine , I would stick with growth or stagnation but not a downfall in EPS which reitrates same thing . 10-20 percent correction healthy. But of before pessimism takes over, if optimism turns into reality , who knows . So, still avoiding completely timing market n going beyond 20 percent cash with a hope to ve 15-20 percent healthy correction for easy pickings. Now, tracking leading indicators of economy is critical for next few months
On the other side rising interest rate, crude price, inflation and eidening fiscal deficit are concerns which market is giving a pass due to bullish sentiment and sooner or later they will have an impact

(kdjolly) #865

Latest article on Mark Minervini blog resonates with Indian markets as well.

(Donald Francis) #866

Judging by the plethora of similar posts, this thread runs the risk of becoming increasingly bi-polar, isn’t it? Felt tempted to introduce some fresh thoughts :slight_smile:

What I have learnt over the last 7-8 years, Investing is NOT a science, its an ART form. Each time patterns may be similar, but are also contextually different - to place that context into perspective is very important. E.g. No single input is a sufficient condition - its important not to get fixated on any one view. Not to choose extreme positions. Try and position oneself slightly flexibly. For bull market peaks, many things have to happen together, isn’t it. But as always, there are a few conditions that move the needle the most - senior practitioners like to remain extremely alert to these.

Here’s what our senior pros feel about the stage of our markets currently. Copying the gist form my recent post in the Portfolio Restructuring thread

Good to always consult folks who have endured at least 2-3 bull market peaks/secular crashes, before hardening informed positions. I always do (I remember only 2008 and my helpless condition, then!)

(Kumar Saurabh) #867

Donald , saw your post in other thread on current marketing sentiment. I think some of views in this thread and your thread ,more or less seems to be inline.

(Donald Francis) #868

Yup. Just thought to highlight the 3 pre-conditions for bubble peaks as Seniors read it. That perspective was important to include in decision modeling.

(maheshkumar) #869

How much I am going to lose in terms of percentage of my portfolio in crash/recession/bear market
Suppose its 75% loss

Then if I invest 100 Rs in bull market and my pf becomes 3x = 300 and then 75% loss means in hand I will have 75rs
So even I make 3x my pf will be minus 25%

So need to make an least 4x ie 400 Rs for break even

Or I need to make more than 4x or more than 400 to get in profitable position after the crash

So my portfolio should by more than 4x

Am I right

(Sidz) #870

You never lose 75% overnight. Keep your loss limited to say 25% and exit markets completely when it hits 25% mark. In this way, even if you make 1.5 times in your bull market, you would end up with having better returns than FD.

The point of this discussion is not if you should completely exit. The point is that new entrants should not invest now in the markets. And that the old portfolio holders may reconsider booking some profits.

(pkk123) #871

75% loss is a once in a lifetime event. It happened in 2008. Won’t happen in our lifetime again.

(Anupam) #872

I read a thread on a possible melt up & subsequent crash. I with due permission want to copy & share the post in this thread as its quite relevant to this thread. @ kashif_1461…Hope you don’t mind sharing your post :slight_smile:

Author has analysed previous bubbles and noticed that an acceleration of index by approx 60% in 21 months prevails before a hard crash landing. Which in sensex terms means approx 41000 by later half of 2018.

I have borrowed the title of this article from a recent commentary by Jeremy Grantham. Read it first here -

In this article, Mr. Grantham first starts by pointing out the elevated levels of US stock markets. Whatever parameters you use, there is no denying the fact that markets are exceptionally high at this stage and have been for some time now. In fact Jeremy Grantham is not the first investor to warn about the exceptionally high levels of the stock indexes. Many other equally distinguished investors have been sounding the alarm as well. Howard Marks also sounded the alarm about the elevated risk levels and gave his advice to be cautious going ahead in his quarterly memo – There they go again… again9. Some other very distinguished investors like Seth Klarman, Paul Singer, John Hussman, Bill Gross etc. have been quite outspoken about the risks in todays economy including the policies of central bankers around the world, China, Trump, etc.

But does the high levels of the stock market suggests that we are in a bubble which is going to burst? In the article referred to above, Jeremy Grantham explains that – “Price alone seems to me now to be by no means a sufficient sign of an impending bubble break.” Stock market bubbles are characterized by exceptionally high prices alongside signs of excesses and euphoria among the market participants. Many experts including Howard Marks, Jeremy Granthan and Robert Shiller agree that although while the current prices are high but the current stock market rally lacks the psychological, touchy feely elements of euphoria. Hence, we are not yet in the bubble territory although there are early signs that the bubble is beginning to form. One of the most important indicator of the euphoria and the resulting formation of bubble apart from price is “acceleration of price.” This has been observed in each of the previous bubbles wherein there is a final acceleration of price which takes the index to levels of ~60% higher within an average time of 21 months. And we can see early signs of this acceleration of price and hence formation of the bubble.

Other than acceleration, there are two other historically reliable indicators of the formation of the bubble. These are: - Concentration and Outperformance of quality and low beta stocks. These are related – concentration refers to the obsession of the investors with a few stocks such as Nifty50 in the 1960s, and Cisco and Microsoft in 1999 and FANGs in the current period. The second factor is pretty much self-explanatory.

The current rally in stock markets in India has been going on for a long time now. As a result, the valuations have become stretched and most of the stocks of quality companies are trading at exceptionally high valuations. The retail investors have poured back into stocks after getting hurt and staying out of the markets after the 2008 crash. All this has made the value investors very nervous and rightfully so. But as we have seen overvaluation is not the only trigger for a crash. For a bubble to burst, it has to form first. And in India as well, the bubble has not fully formed yet because we have yet not seen the second most reliable indicator of the bubble – acceleration. The Sensex has gone up by ~28% during calendar year 2017. While it increased by 16% during the first half, the growth decelerated to 10% during the second half of the year.

The current rally started in December 2016 and has been going on more or less uninterrupted for the whole of last year. Just to get a flavor of where we can go from here. As we saw, historically the price has increased by an average of 60% over the last 21 months in the previous bubbles. We already had an increase of 28% during the last 12 months in Sensex. Which means that the price should increase by another 25% during the next 9 months. This will take the Sensex to 41,600 by September 2018. We can construct various scenarios but the bottom line is this – we should see a final acceleration starting soon for a bubble to form.

(maheshkumar) #873

That’s good to sell when market drops 25%
So that feeling market falls another 30% then we will save 30%

But if market drops 30% and rebounds 50% then we will lose 45%

So when market crashes do we hold or sell

(maheshkumar) #874

I hope u r right as 70-80% loss is devastating