Was looking at ICICI bank’s long term RoE (11.6%) and the stock price lows of Dec-11,Aug-13 etc.
Let’s minus 1.6% to account for dividend yield. Apply the CAGR (compounded annual growth rate) of 11.6%-1.6%=10% from the lows of Dec-11, aug-13, the price that comes out is the same as CMP (current market price) suggesting that we may not be far away from the bottom atleast in the bank nifty (if we can consider Icici to reflect bank nifty’s performance).
I will be buying my first lot of investment in the range 7250-7300 as it is a good support area.
Thanks Hitesh Bhai, for sharing your thoughts time and again and helping the community in these panic times. I hope we stick to our plan and remain calm and prepared. It looks there will be big MTM for many PFs in short term, but in the long run, if earnings keep coming, tide will turn, hopefully sooner than later. These days mkts are also very swift on both sides. I also think it may not be as bad as 2008. To me not doing much activity in PF may be a right thing, as there are chances of big mistakes if one switches to new names as one is moving from well researched stock to a less researched stock from investor point of view. Gradually coming out from less quality names and sitting on cash ( still difficult for me) and redeploy in very high quality names at lower levels can be a workable strategy. Increasing equity allocation ( if possible) will be also rewarding from 2-3 yr perspective.
Last but not the least, not watching stock prices on daily basis also helps a lot in sleeping well at time.
Best regards
Santosh
Hi ,
I have 23 stocks. I want to reduce it to 12-15. I want to cut the weeds & water the flowers. I mean get entry into quality & exit from speculatives. Overall portfolio is 12% down.
Now if I exit weak ones & enter better ones, even if both are down, but still there is actual loss booking.
Is it ok to do so, or some alternate option advisable ?
Thanks
Anupam
VP Guys,
Correction vs Bear Phase vs Volatility Vs Reminiscent of 2008…the debate will continue.
However, anyone with actual experience of 2008, can share what should be the strategy- Buy on dips, Swap, wait & watch or exit with cash !!
Praying for survival by having very high quality names and cash was name of the game. Lot of people did not believe in cash in banks. There was almost a run on ICICI bank where FM and CEO had to give assurances to depositors. People withdrew cash and kept with themselves or shifted to PSU banks from private banks.
2008 crash started with aftermath of Reliance power IPO. People were definitely euphoric. PF tanked even about 60%. But I do remember having good shares the PF recovered by mid of 2009.
This time may be I am biased but I feel there is still no large scale euphoria.
Participating public look is more informed and quality is a big premium. More money being spent through Mutual Funds.
I do not know why but I do feel that market has bottomed out.
Appreciate seniors comments.
Rajendra Badoni
Hey guys,
I have been in the bloodbath of 2008. I was quite young and inexperienced at investing then, majorly medium term trading on chart patterns only with zero regards to fundamentals. Last time (2008) i suffered major losses as most of my stop losses did not even get the chance to trigger and by the time I realised the downtrend on the charts, it was already too late. This is the folly of using purely charts… I’ve grown a lot since then.
In my experience, this time, it will be even bigger plunge in the markets globally since the Fed cant do much as the interest rates in US, Europe, Japan etc are already near zero (or worse, negative!!). Plus, the stimulus, they gave to revive the economy has worked only in the short term. Now, to achieve similar results, they’d have to give a bigger shot of bailouts than before. And I can’t fathom the US Fed going into more Debt as they’re sitting on about 19 TRILLION of debt!!
Now you may wonder why am I prattling endlessly about the US? Most FDI is from the developed world, and if they crash heavily, we can be safe to assume that the fund managers will pull out the money from developing world (read BRICS) and re-invest it in their markets.
Add to that all of the commodities and banking woes in India.
Couple that with the fact that, the small scale sector is constantly feeling the pressure of recession since maybe the last year at least. I am a small business owner, and everybody I talk to, talks about how bad the consumer sentiment and demand really is.
In addition to it is the downtrend of Nifty and the Midcap Index, which are now confirmed on the weekly charts. We can be safe to assume that this is the beginning of a bear market IMHO, one which may last months, if not years!!
DISC: Sitting 100% on cash (Since last month, sold all my MF and equities holdings). Looking to invest 25% of my portfolio in Bonds and Gold/Silver.
You are the smartest and luckiest guy around but dont throw it away by buying Bonds, gold and silver. Have faith! 
If I was in your place (no chance 
) I would seriously start deploying in batches of 10% on any upmoves in market. I remember seniors mentioning pyramid buying strategy during bad times.
Carnage On D street ! Sensex tanks 807 point !!.
Disc : I am buying on dips of pref large ones & blue chips
However I am not sure of the ideal strategy. Below I am listing some options. Request your views.
1.) Buying on dips
2.) Stay invested to wait for a bottom and then buy in larger amount
3.) Exit and cash out and wait for bottom to buy in huge bulk
4. None of the above- other strategy if any
Also to address portfolio rejig- should we exit low conviction stocks down by 20% to buy high conviction stocks down by 8 %. Even then it’s loss booking, but need views on the wiseness/ wildness of the strategy.
Sharing a link from MC.Com
Latest News | Latest Business News | BSE | IPO News
[quote=“amishra, post:71, topic:2833”]
1.) Now is buying on dips is ok,
[/quote]Yes, but avoid small caps
[quote=“amishra, post:71, topic:2833”]
2.) or stay invested to wait for a bottom and then buy in bulk
[/quote]Stay invested in good names - Yes; wait for a bottom and buy in bulk - No
[quote=“amishra, post:71, topic:2833”]
3.) exit and cash out and wait for bottom to buy in huge bulk
[/quote] again I wouldn’t try this on companies with good fundamentals
[quote=“amishra, post:71, topic:2833”]
Also to address portfolio rejig- should we exit low conviction stocks down by 20% to buy high conviction stocks down by 8 %. Even then it’s loss booking
[/quote]Yes. It will be painful but necessary.
This is the time to be in the market and not out of it.
The P/E of Nifty is still 18.65, even after today’s carnage. It must come down to at least 12-13 for a bottom to be visible IMHO.
I would book all profits/losses (losses more than profits, because they need to cover much more ground to break even) and wait for a bottom to emerge. Meanwhile, I am searching for good stocks and build conviction to buy them at much lower valuations.
Devansh
PE to come down to 12-13 for bottom. It’s further 40% drop from current level. Scary :-). Can you share what was the PE at last 2-3 bottoms…2008, 2011, 2013 etc may be we can have some historical benchmark to validate your views.
Total MCAP-to-GDP ratio is at 86.30L cr/ 146L cr = 59% currently. In 2008-09, this ratio went lowest to ~55%. This tells us, risk reward ratio is in investors’ favor currently.
NIFTY P/E appears high, however need to factor commodity price collapse.
Also I think the nifty pe is calculated on standalone numbers. Consolidated it is lower than current value.
01/01/1999--------> Start of data provided by NSE website------> NIFTY P/E : 11.62
23/10/2000--------> Market hits low for the 2000 crisis------> NIFTY P/E : 17.30 (Maybe due to the huge corporate earnings decline?? I donno. Pls help here Seniors??)
27/10/2008--------> Market hits low for the 2008 crisis------> NIFTY P/E : 10.68
So, while the P/E of 2000 crash is similar to our current levels, one of 2008 crash is a whopping 43% below our current levels. Being a conservative guy, I, tend to believe that the worst is yet to come. Still, scanning for good stories which can thrive when the recovery comes.
Great VPs (Sandeep, Sunil, Madhug & Devansh)
Nice to see some numbers & ratio based argumentation. The objective is not to play predication game of next week nifty level but to backtest & foretest the validity of the Macro Ratios prescribed by great investors. Do these ratios throw any guiding light or fall flat in such situations is what ought to be seen !
Can you share the source of MCAP to GDP ratio…would be worth reading & analysing
Also at consolidated level, PE should be lower as Pharma is a bigger chunk now which has higher consolidated eps and also demands higher PE.
MCap to GDP ratio:
http://articles.economictimes.indiatimes.com/2015-04-15/news/61179978_1_market-capitalisation-gdp-ratio-nominal-gdp
At the end of yr 2014, it was 76%. Today it should be close to 59% as pointed out.
Also, consolidated p/e should be looked at which should be arnd 15 atm.(guessing, as it was ~18 iirc when nifty was 7800).
