In your original comment you very specifically said “Also, have you considered that nifty PB is close to historic lows?” - so I looked at Nifty.
Yes my bad. I myself have been looking at Sensex.
The latest Nifty PE, as per the NSE website, is 27.36
I am not sure how effective the recent economic stimulus is going to be. Whether it will trigger the much needed demand in the Auto Sector.
Basically the FM rolled back some of the worst items of the budget. But there has not been any positive announcements. One thing which can help sentiments is removal of dividend distribution tax. I don’t think LTCG will ever go, so point thinking about it.
But the economic stimulus is too little to revive any industry leave alone auto industry. How many cars can the government buy? How will depreciation of 30% for the first year for cars bought till March 2020 help the salaried class? Now if some small business buys a car and accounts for 30% dep in March, what is the guarantee that the tax officer will not, according to his discretion mark the car as used for personal purpose and not for business purposes. Lot of uncertain things.
I will use this as an opportunity to clean up my personal portfolio which from time to time tends to get dirty. Otherwise I do not see much scope for revival of fortunes in the market. Personally I have moved a significant portion of my money to gold ETFs and IT companies. I will continue to do that till this rally fizzles out. Basically I am sacrificing 5%-10% upside to protect 25% downside. The index will not fall 25% but some high P/E stocks can fall 20%.
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I don’t think LTCG should go. It’s a valid tax. What should go are the buyback tax & the dividend distribution tax and STT.
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Yes, its a tough call.
If stock is all that one is invested in, then he should shift to a defensive stance. Get into large cap good names, trading at low multiples. Like Castrol, Siemens, Gail, Ongc. Such a PF is likely to match returns from FDs.
Be prepared for major bargains in the Pharma sector. Good companies are facing issues which are temporary in nature.
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I would not call it Index Management. It sounds as if “forces that may be” are conspiring by putting their own billions on the line to convince the retail or global investors that all is fine. Too high a price to pay.
I think due to slowdown of economy, the money is finding safety in the last fortress, the best of the best: The Nifty top 10. The investors believe that these top 10 companies will be able to weather the storm. However, when this belief is shattered, a true bear market will start. Weaker business will fall more.
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https://finance.yahoo.com/m/a9db5ee3-705d-3384-a0a2-dbf95f664abe/a-‘lehman-like’-market.html
Just means that nothing of this sort will happen in immediate future
You mean, if a news article can see it then its not a black swan anymore. I get it.
There might not be panic crash, but surely the recession alarm has gone-off. Gold has spiked too. The writing is on the wall.
If someone can predict, he/she should be a billionaire quickly by leveraging else he/she has no faith in own prediction. People have been predicting for another 2008 since 2014.
Right. When the news are talking about a Recession, it never really is. However, given the current circumstances it would be naive to expect a revival of corporate businesses.
Lets see how this plays out. Most of the scrips that I am scoping are still trading high.
Nifty PE will be more expensive from Sept 27 after the inclusion of Nestle…Indiabulls is going out 
Not by much, not in a noticeable way. Indiabulls had a very small percentage of weightage.
If Nifty PE has to correct, then it is only going to be by the way of Financial Sector correcting. Everything else will only make a dent.
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Good to hear a bullish perspective in these times. But what do you think about men’s underwear index showing that we are in recession?
I do believe that demonetisation and GST have disrupted supply chains and that is showing its effects. That is why certain businesses, like IT sector, are doing well but others, like Auto and innerwear, are falling. This recession is being very selective and so has been stocks. It’s best to use these times to filter out stocks showing strength, and to study their business, as the leaders for next bull run will be among them.
When will the bull run start? I don’t know. If the bad economy makes the government carry out structural reforms, like land and labour reforms, privatization, etc, then that could act as a trigger but I don’t have any expectations of such action at present.
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The addition of Nestle will make the index more resilient. So investors will be lulled into thinking stock markets are doing great and not falling and hence there is no recession. Th good thing is NIFTY will be made up of the smartest and most stable companies of India. After some of the metal stocks and some PSUs get out of NIFTY Index the NIFTY will become more stable. We will have a situation where the overall economy might be doing bad to average, the NIFTY Index doing reasonably well and the Next 50 and others under-performing significantly.
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Nestle is a great company and has the potential to all that you have mentioned. For that it will have to become more noticeable. Indiabulls was 0.42% of Nifty. So, it will take a decade for Nestle to get to such a point.
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Very insightful. Anyone tracking entire listed universe PE for BSE or NSE ? Also, how is sectoral PE trends for consumables and FMCG? Now this sector is stable and trades at high valuation. Why not this get can’t get corrected ?
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“We are currently trading at a PE ratio of 27. The highest we can go from here is upto 31.87, which would be true in 99% of the cases. And what is to happen after we reach, say levels of PE close to 32?”
Author simply assumes that PE 32 will be reached just because it is +2 SD. No logic behind it.
“To fall from a PE of 27 to even a conservative 20, would mean that the Nifty Index, which currently trades close to ₹11,000, would fall to ₹8,150, a level last seen 3 years back 2016!”
The author expresses disbelief in this possibility, which reveals his bullish bias. The article was not written from a neutral perspective to begin with. The numbers and statements are twisted to arrive at a bullish bais.
The author also talks of Index manipulations and concludes the following:
"All speculation aside, because of so many of the reasons above the Nifty 50 is not necessarily the best barometer of the economy or the Indian equities. "
I think Nifty-50 is a good representation of corporate India, but just temporarily lopsided due to the financial sector and few others holding-up.
Around 2016 every decent stock was a must buy for the fund houses and retail investors alike. This pool shrunk as the quarterly reports started getting grimmer. Now, there are only a few scrips in Nifty-50 that have decent numbers hence they are not seeing the sharp selling. Simple logic! I am fairly sure that if HDFC Bank does not match up to the given guidance that stock will fall too.
I feel that the author is merely expressing his opinion, which, as all opinions go, could be right or wrong.
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