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

(Amit Jain) #1089

@tusharsp Tushar, you rightly pointed out that this thread is not adding value.

I expect that as the participants mature as investors, this thread will have minimal posts/messages at PE > 22… and a lot of buzz at PE < 17. Alas, exactly the opposite is happening.

Why behave like one is Nifty 50’s promoter who is willing to buy at any price, when several books, by eminent and successful fund managers, say that you can do better. A fund manager has strict rules. You don’t.

This thread should be about honing skills in “Buying Low”. And not about, “Its alright to buy at any price” kind of argument.

This thread should also not be about predictions. Except for one off remark.


@jamit05 & @deevee, you have done a great service to us by highlighting the risks at current P/E levels and showing P/E normal distribution curve at the right time. It is quite understandable that momentum / fully-invested folks were in a bad mood yesterday after seeing the 1000 points drop on the Dow.

Yes, this thread is “pretty simple.” Just like investing is simple - Buy Low, Sell High. But most folks don’t get it. Investing in stock markets is about both numbers and behaviour. If the markets were all about numbers, then Efficient Market Hypothesis would probably be right and we would all be better off buying index funds. I would argue that investor’s behaviour is probably more important than numbers for long-term wealth creation. Else, next bear market could wipe out all your prior gains.

Why is it not okay to assert / caution when someone else says “upside is infinite”? A couple of big down days like this week is all it takes for such investors to go from ‘sky is the limit’ to ‘the sky is falling’. Like Buffett says, only when the tide goes out do you discover who’s been swimming naked.

Why is it not okay to re-assert when others keep repeating that earnings will catch-up in the near future? There are no facts about future, only opinions. In a sense, we are all blind men trying to describe an elephant.

Patience is required not just for investing. It is required when listening to the opposing views. Have a great day!

(Mahendra243) #1091

Is there anyway we can identity next bear market? rising interest rates and inflation can be one of the factors any other things we can identity would be great help to investing community…but isnt a old rule that it’s always good to stay invested in a business which is doing well even in bear market to create massive wealth and prices will catch up?

(khushi) #1092

Another negative trigger for market - SBI posting loss - first time in 17 years. Reports loss of 2416 Cr. in Q3.

All psu banks in for a good correction in coming week.

(Mahendra243) #1093

This is more on a expected lines when you merger all the bad performing psu with SBI…I think this should give some good entry points those who want to buy psu’s i think

(Amit Jain) #1094

Sunday Morning Mind-Chow:

In case of Index investing, the days of buy and hold are probably gone (or were never there). If one wants the security of Large Caps, then one has to employ every advantage to get decent returns.

Consider the case of SnP 500.

If one had an average purchase price of 1000 in 1998, then
in year 2018 at Index 2600 one made a CAGR of 4.90%

This is unimpressive even by US standards. Considering we have taken a near bottom price of acquisition and topmost price of sale.

The problem is, the investor is doing “buy and hold”. This strategy needs to be further optimized.

What I take away from this is, when one is Index Investing, he buys low, like he has sworn to do, he must also sell high. This will give an additional return, depending on the aggression that is factored into the “selling-algorithm”.

Simply speaking, selling high has given a return of 12% CAGR. If one is able to sell even 30% of PF at 12% cagr, then he is adding 4% to overall gains. That is almost doubling the overall gains in the long run.

In other words, there is a time to buy, a time to hold and a time to sell. Just buying and holding Index Stocks is as good as making FDs, and now there is tax in both.




(Kumar Saurabh) #1098

Not sure how many know him but my respect for this man has gained with his every passing interview. The current situation always looked like tussle between hope which will sooner or later play out in reality (Q3 looks like the reality ) and too much expectation n not a bubble but may be a higher quantity crash (15-20%). He explains beautifully the similarities between 1987 crash n current situation. Besides that too, his interviews including this one worth a watch. Realize reading more and more history is so important


Just saw this article in moneycontrol website. Is this the correct EPS figures for NIFTY?

(Storyteller) #1100

Thanks for posting this one. So sharp, precise and no nonsense.

(blueeyedinvestor) #1101

The real story in P/E debate lies in the denominator. Optically Nifty at current range of 10,383 looks so reasonably valued that it throws opportunities for all of us to go and start buying the fall. But looking closer at Edelweiss table, one need to understand that the Team has projected an earnings growth forecast of 22% and this throw up Nifty P/E at 17.6 times (at FY19 EPS). 22% growth is super normal expectation, given we wont have similar run up in metal earnings, there wont be the base effect playing its role (Demo and GST) like in case of FY18 and also in Q1FY19. The major disappointment in the earnings from Q2FY19 onwards will also result in considerable realignment of Index.


I am looking at the FY18 numbers, which is just one quarter away. The EPS as per report in NSE website is around 415 (as of Q3). But as per Edelweiss report, it would be 483 after 4Q. So wanted to understand the difference.


The difference would be because NSE provides standalone figures while the analyst report would be looking at consolidated earnings.

(josephseby) #1104

As per NSE website the latest standalone EPS is only 407/-. (PE of 25.75 and Nifty level of 10391 works to an EPS of 407/-). It had fallen from 413/-. May be due to addition of poor results like that of SBI.


(VP_amit) #1106

Interesting statistic from Berkshire Hathaway:


… so such a drop has happened pretty much once every decade since the 70s to such a great company.

(Tejas Chachcha) #1107

All stocks go down when there’s panic on streets, though difference is quality stocks would bounce back and recover quickly while the dud ones never come back.

(Kamlesh Patel) #1108

“Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, and one by one.”- Charles Mackay