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

(Nolan) #1002

Though I like your suggestion, but this government has explained its principles of implementing economic reforms using an analogy of a doctor operating upon a human body. So, Modi says that a doctor will not operate upon the body until the vitals are in check and all other physical parameters are functioning normally. Similarly, this govt has initiated reforms exactly when they thought the economy was in its prime phase. That’s how they intend to make quick recovery after the temporary hiccups of the reform process. If you consider their decision to bring in LTCG taxation, one must keep in mind that the markets had given phenomenal profits in 2017. Those who rode this wave would presumably be sitting on decent profits. And the portfolios (generally speaking) would be healthy enough to take a 20% or so kind of hit. However, in the long run, there is still a consensus that corporate earning and economic growth is on an upwards trajectory, so recovery can be fast. But, going by your suggestion, it is nearly impossible for even the govt to predict the macro conditions one year in advance. It may have led to an even bigger disaster had they announced it last year, and the tax reform would have collided with another unfortunate event like a war or maybe a loss for BJP in Gujarat, which may have compounded the adverse impact upon the markets.


On the other hand, a sudden annoucement when the markets at such a high level (the main point of discussion of this thread - Nifty PE above 25) is sure to cause a knee jerk reaction like it did today. I am sure many small, inexperienced investors would seen their portfolio shrink and tried to exit at a loss. So the investors lose and the government loses as well. I don’t think the govt should be looking only at their gains to make such announcements. If it was announced well in advance, everyone would have been prepared adequately. Just the announcement of a taxation plan in advance is not going to turn a bull market into a bear one. They could have also sugarcoated it along with a better economic reform plan.

(Deepak Venkatesh) #1004


The valuations cooled off a little but no where near the comfortable zones. As per @jamit05 to reach PE of 22 would require a tremendous correction. At current nifty earnings that roughly 15% more correction (hopefully the earnings keep increasing) to reach 22 PE zone. I guess we will see some more of it.

Also this was probably the largest drop in the last 14-15 months I believe.


p.s. the US yields have sky rocketed. All things happening at the same time :man_facepalming:

(bharat.jain) #1005

Guess law of averages is too strong

(Amit Jain) #1006

I remember, Reliance IPO, the largest at that time, got finalized just 24 hrs before the Lehman news. When lakhs are crores are on the line, i find it hard to believe that it is a coincidence.

(blueeyedinvestor) #1007

Not sounding bearish…but just a highlight…Is anybody tracking … GE is into deep financial crisis…UK largest contractor recently announced bankruptcy leaving billions of dollars of vendor liability and pension money in lurch…Deutsche Bank is in suspect and charge of rigging interest rate…and has reported depressed numbers…US auto loans delinquencues are rising fast and running into billions of dollars.

Here in India the delinquencues in housing loans are increasing

(Harsh04) #1008

Can you quote the source of this information ?

(blueeyedinvestor) #1009

RBI has quoted this…I don’t remember where I read this…but I think if you Google it you will get lot of info on this …

(blueeyedinvestor) #1010

Just to add further Australian housing market is into deep shit…

Not necessary the next crisis will be triggered by same factor which led to previous crisis.

(Chirag) #1011

Can you please quote source for the points that you have been raising? Thank you.

(bharat.jain) #1012

I just googled Australia housing market

seems liquidity has done lot of damage everywhere and now yields rising will definitely raise loan rates across the world and will have impact on earnings and also on loan repaying capacities.

(Amit Jain) #1013

Nifty 50 will give a fake rally. There is residual bullish sentiment. All bulls have not been obliterated, they aren’t called “bulls” for no reason. :slight_smile:

Lets see how that plays out.

(blueeyedinvestor) #1014

One more thing…SGX introduces derivatives in Indian indices and stocks…This will shift Indian volumes in my guess…Let’s see how the volatility pan out this year…with introduction of LTCG here in India, no such tax in Singapore, start of SGX trading and coming pain the global market…which may be 9 to 12 months away…

Disclosure: Fully invested since last five years.

(josephseby) #1015

This thread dedicated to Nifty PE valuation seems to get distracted to other topics also. mean time as per NSE data Nifty PE as on february 2nd close is 26.04. This works out to nearly an EPS of Rs.413 /-. The EPS on December quarter closing was only 391/-.

This means a 5.5% increase Q on Q. The much awaited earnings recovery is coming fast. This will gain pace as the transfer from the unorganised economy to organised one gain more pace as a result of GST. The fast earnings recovery and a rapid correction which we are witnessing now (atleast in small and midcap space) will bring the valuation levels to a comfortable zone much faster. Also the reduction in corporate tax for companies which has less than 250 Cr turnover can help several smallcap and microcap companies

Discl: 80% invstd, 20% cash planing to invest of smallcap index holds 8000 lvs.

(Sidz) #1016

In my opinion, the downside fall this time is soon to be stopped. FII’s are still buying into the market. The next leg of bull rally towards levels of 11400 are going to be steep upwards. It is at very moment when the last bear retail investor turns into a bull. And market crashes following that with a black swan event.

P.S. 2-3% is not a crash. It is a correction(healthy correction it will be named in the forthcoming final bull rally)

(manojkol) #1017

this thread and in general also confirms my opinion market is a perma bull every fall or even a crash can be seen as correction over very long period .if u see 30 year charts even 2009 crash will look like a correction only,but is that correct ?i dont think so market is all about timing , though its fancy to say never try to time the market. but when we buy at low valuation and sell at high valuation …we are doing that only .timimg the market and that is the essence of smart investing and doing all this hard work. otherwise just invest in index funds in a sip manner . why bother with such hard work and digging into so much stuff


Nifty PE based on consolidated earnings is is 23.48. Typically PE base on consolidated earnings is 2.5 to 3 lower than what shows on NSE website.

But lower shift in PE is justified due to firming of interest rates, higher deficit and so on.

PE should drift to <22 by year end based on earnings if rally does not push market higher.

Now with LTCG+STT logic for selling out (long term holdings) and buying later based on current market levels is further negated.


(Amit Jain) #1019

Furthermore, there is a difference in timing the markets and marking the time. Allow me to elaborate.

When we say “timing the market”, we tend to predict wherein we call-out well in advance what may happen in the near future. It has been my observation that, these calls are usually not backed by actions.

On the other hand when we say marking the time, we tend to label the current scenario as whether it is worthy of a specific action. For ex. now at PE 26 it is not worthy of investment. However, when it becomes PE 17, whenever that may happen, then it will be worthy of investment. For ex.

Just wanted to highlight the subtlety.

(Deepak Venkatesh) #1020


From a purely index perspective I think one can make comfortable money by just buying the nifty by tracking the PE levels. Yes I would be guilty of timing the market but as @jamit05 pointed out its not really that. Just run through the corrections of nifty and you will see how quickly the PE drops once it begins correction.

Also for more than a year ie since Jan 2017 we have consistently been over 22PE and in this period 50% of the times over 25PE. Looking at the table below its not a level where we will be spending a lot of time. (derived from the bell curves shared in earlier posts).


So personally its important to wait patiently and watch. Maybe add onto a few personal darling businesses but not more.


(nish_shah161) #1021

First part proved right :). Could you offer your analysis for the 8800 levels prediction, please?