My intention was to indicate the need for us, individually and as a group, make focused effort to strategize. Wherein, at least make sure that we conver the important bases, to ensure that one doesn’t make major mistakes.
For example I see index portfolios on this forum, which have as much as 30% exposure to one single scrip. How is that index investing? Why is that person referring to the index PE, when he has such a large skew. He is completely decoupling himself from the dynamics of nifty bell curve. That, imo, is not index investing. It may succeed, but not in the way we foresee it.
My latest blog. Though it is not directly related to NIFTY overvaluation. Seeing the market traveling back in time and look through eyes on data till 31st March 2017, there are some points which connect dots between the bulls and bears . I have tried to be as less biased as possible and let the data talk. @Yogesh_s@jamit05@Mridul@deevee@devaki.tripathy would be glad to know your views and please highlight of any major flaw in data/analysis
@suru27 - This is phenomenal research and analysis and is the best thing I have read all weekend. I think the conclusions you have drawn are quite accurate and I concur that D/E will hit a trough in a couple of years and once demand revival happens (through the infra, road spending) the existing capacities will hum along and generate better return ratios and justify the valuations.
Your risks of commodity prices are also quite apt and also the conclusion that microcaps are doing well at present because of low commodity prices - You can see this in companies like Himadri Chemicals. I too doubt the ability of these microcaps to pass on raw material prices and sustain margins if there is a rise in commodity prices.
Looking forward to your next piece on demand revival. Keep up the good work!
Almost prophetic posts above regarding the peaking and eventual fall getting nearer. Unfortunately I assume some of us have not heeded to the advise due to FOMO. I could only save 20% in cash. Brace yourself and wait in sidelines for the next 18 months which is how long a bear market is supposed to last!
One small correction and how you happened to talk about bear market? Bear markets happen when there is recession… global growth has been picking up well…the correction has something to do with inflation getting back to USA much faster than investors might be excepting…which will force fomc to raise rates faster
Whether it is a small healthy correction or bear market, what I meant was the posts here suggested this for a while and this is something most value investors have been waiting for. Having said that most of the midcaps I hold have been down by 10 to 15% already in the year and it would easily be another 10% down just today or this week. So it is more than a small correction in my opinion.
When we talk about moving to gold and managing equity / cash balance based on market valuation, its not just about managing returns. Its about being able to sleep at night when crashes like these happen. In the end, “focus on earnings, quality business only”, always-fully-invested folks may earn the same or more returns in the long run, but it helps novice investors stay the course and not experience “deer in headlights” syndrome when events like these happen.
Yes, the panic has set in…VIX moving above 30 has historically been a great time to buy.
@phreakv6@onlish2014 @dheegarg@nav_1996@devaki.tripathy Thanks guys for the encouragement . If any queries, please let me know. Collecting all feedback and queries on analysis. Will consolidate and try to put a response for further clarity
Is it just coincidental that the crash has come around the time the new Fed chair Jerome Powell takes the helm? This seems to be a recurring phenomenon, going by the sell-off in the initial period of pretty much every Fed chair. Its not like the yield curve was revealed only this week. Maybe its a tactic of wall st. to instil the God complex into the incoming Fed chair. The new man in must feel like its left to him to be dovish and save the markets. Seems to have happened under Bernanke (2006 sell-off on the day he control and then the 2008 crash), Greenspan (1987 sell-off in the first 2 months) and even Volcker in 1979.
So can we see markets correcting more than 10% around the globe in next 2 months…seeing the dow and dax futures we are for a really bumpy rides in coming days…anyone up to predict the bottom?
Many events, we can talk about others we just let happen. In either case, when the market is “not expensive”, one has to continue to SIP in his portfolio of individually picked stocks or MFs.
Current status of Nifty
PE 25.78
Nifty 10666
EPS 413
Average PE 20, which pegs nifty at 8300
Great Value below PE 17 pegs nifty at 7000
It is highly likely that these values will be achieved in the short term. At least, such is the recent two decade history.
Nifty EPS was 445 as per calculations by another VP-er post Q2 earnings. I think this should be around 460-470 levels post Q3 considering Q3 is replacing the demonetisation quarter. Going by this, I don’t expect a fall under P/E of 20-22 which would be 9700-10200 levels. Remember that next two quarter earnings are going to be better as well because they have a low base due to extension of demonetisation in Q4 and partly GST in Q1 FY18. Not trying to outguess the market but trying to reason an educated guess that is neither too pessimistic nor optimistic.
