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

(Mayank Narula) #1335

There is a good chance that 1 trillion valuation was last hurrah in Apple’s journey. They may have all the billions in cash reserves, but nothing much to show in terms of product development after Job’s death.

(vengama) #1336

posting it here as it touches over nifty PE, besides providing a lot of insights over market…

(Amit Jain) #1337

Yeah PE multiples are bad, nonsense. These people only focus on cash flows.

And the same paragraph lead towards crisis.

(Changu Mangu) #1338

Market Musings.

What a change from the euphoria of 2017 December to 2018 December. Then it was FOMO and now it is close to fear. Next comes capitulation.

Last year this time, all the talk was growth, stocks hitting new highs and believe in India.

Now today, it is Donald Trump Trade Wars, Inverse Yield Curve, Fed Tightening, RBI vs Govt, FII Pullout, Rupee vs Dollar, Upcoming National Election, Global Recession & Contagion Fears etc etc etc… Now not many believe in India or any global stock market for that matter :slight_smile:. I do.

I think the time is very very close for supplying Cash and Courage.

We make most of our profits buying great businesses at decent valuations. They may go lower than our purchase price in the short term but that is the price for long term success.

Just thinking and will probably be wrong and I am a novice and not experienced and not SEBI registered etc etc - the fear is creeping in, so the prices close to capitulation for many stocks and on an Index level the base scenario seems to be around 9200-9500. I can handle a 10 odd percent drawdown so can I deploy close to 10K? Yes.

Selection here is very important as some are still very expensive. SIP / DIPS and decent diversification is the strategy. Some will give returns in 12 months and in some earnings will grow and catch up with valuations in 2-3 years and will give return thereafter.

Time to keep calm and start dipping in the toes.

And, just don’t buy total junk.

(Devaki Nandan Tripathy) #1339

Nicely crafted words. Just two more thoughts. First, every bull market has a new set of winners. So companies that led last one may not move in a hurry and lead the next market. Second, one needs to have a probability based mindset and assume the possibility of him being wrong. It’s not good to be wedded to a stock no matter how bright the future seems.

Your profile pic change tells about your change in mindset. :slightly_smiling_face:

(Amit Jain) #1340

If 9500 happens anytime soon, it will still be 23PE. Individual scrips may correct deeper, but who knows what’s normal. Look at Sun Pharma, a year ago who would have thought that the price is filled with utter muck.

When Index is normalizing PE wise it gets us good companies at low prices, that is only the second motive, the real reason is the muck that it uncovers. And lots of scrips have a lot of muck;

As the price grinds, liquidity gets tighter and companies struggle to perform, the ones with weaknesses will fall. DHFL, Yes, Sun Pharma and more are expected to be added to this list. This grind is therefore important.

Investors in general are still feeling heady from the recent bull run, and are happy to pay-up. Current prices have a good dose of expectation and hope grilled-in. This is apparent because the growth in the last two years has only declined, and sharply so in some cases. This will be truly reflected in their respective share price when liquidity ebbs away.

Another point of advantage that I would like to re-iterate from what I have learned from reading another VP-er’s post:

Sometimes the market leader is trading at a far higher valuation than the second in line. He said, in last three years returns from investment in Berger was better than from Asian’s, share price wise.

When the exuberance is truly fizzed out of the market price, many such opportunities will surface.

PE 23 is only the beginning.

(Tushar) #1341

Wouldn’t it be more appropriate to consider the consolidated earnings for PE than standalone if we have to compare with past index levels?

(Amit Jain) #1342

Past consolidated earnings to be compared with current consolidated ones… not to be mixed. Consolidated or Standalone, they have different levels but paint a similar picture, hence would make a similar bell-curve/histogram.



December has lot of global events and in all likelyhood market will be super volatile. OPEC, FED, Elections etc. Today sensex plunged by approx 600 points. Globally indexes are correcting. China tech companies are scrutinised by US, adding fuel to fire of tariffs and trade tensions. Lastly india gdp forecast are downgraded as well…

Buying during panic is wise, but given high valuations in india, wait and watch seems to me a Prudent strategy. Infact gold can be a safer bet for the time being…

(gautham1) #1344

Hi Guys,
I know things like rbi governor, election etc wont matter in the long run. But I was looking at SGX nifty. It fell by over 150 points after Mr Patel resigned. The next morning, BJP was trailing in the early round itself. As expected, market crashes. But it recovered in the afternoon. ( Despite BJP losing 3 states.). Today another big rally. This must have taken even the experts by surprise. What could be the reason for this?. ( The DOW hasnt gone up either).
PS: I hate discussing about market/individual stock price movement. But still posting it its rather strange. Wanted to understand the market behavior.

(phreak) #1345

@gautham1- This is what happens when everybody has the exact same plan. Everyone wanted election uncertainty to get over to get in and were waiting it out. I don’t think anyone was interested in the outcome itself as much as the uncertainty of it. Patel resignation is very much a “perceived” short-term positive for a lot of things like interest rates, banking regulations, liquidity and so on. So all it takes is a few big asymmetrical bets squeezing the shorts out of the system while making the bets which were on hold to get in past elections, feel welcome to go long (double whammy effect).

This is easy to read in hindsight but I did expect something like this. However, I thought it would take a token fit for a day or two before this recovery happened - sort of like Yes Bank going back to 150 yesterday and then recovering from there late today but again, am sure a lot of people had the same plan as I did and acted on it in the first hour. There are not many unique thoughts left to go around that are worth big payoffs.

But I dont think this should be read as the market having taken everything in its stride. It seems so because of a few impactful moves happening in a short-span of time. With time though, sanity will prevail and by then those few large asymmetrical bets would have gone home to sit it out until the next opportunity shows up, leaving the longs to fend for themselves and the shorts to lick their wounds.

(gautham1) #1346

Thanks a lot. But not sure if I got the answer : ) . This rally defies all logic. One of the craziest moves I have come across. ( Its not that I am short or hoping for for a fall) . Every expert was talking about election and its negative impact.
The media/experts always attribute every fall/rise to some event. This time, I haven’t seen anything. (Of course a few are seeing positive in BJP vote share remaining the same.

Actually the US market is more puzzling. One day the market goes down. The headline will be “Dow plunges on trade war, slowdown fears”. The next day it goes up. The headline will be " Dow soars amid easing trade war worries"

(James Sebastian) #1347

I am newbie and I liked @phreakv6’s answer. What I observed in last two years that Ms. Market discounts events much ahead it happens, unless it is totally unexpected typed. Even her mood swings are ahead of its time :wink:

RBI governor resignation possibility was discussed almost a month now. Election results and possibilities were also discussed. I tend to believe that Market priced even a loss in all three states. DIIs bought yesterday and FIIs sold yesterday, probably institutions/MFs decided to buy after getting to know the wind may be a possibility. Also probably market was ‘simply’ waiting this uncertainty to pass for a bounce. Now what further we can say about this (and including this bit above ) is pure speculation and will not add much value to the thread.