How do we interpret these numbers today
FLL -3475
DLL+3918
who sold the market today? Retail? PMS funds?
or does FLL’s hold onto their cash position and sold in futures…sorry i dont know much about futures
Great charts, as usual.
Nifty, for an EPS of 415, is still at PE 24. Historically, it is still very high.
If a PE of 18 be considered as average, then 7500 is the number. In the recent decade, there has been no better time to expect this.
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I don’t know where the bottom is, but mean reversal does not mean reverting just to the mean. If 18 is the bottom, mean becomes 23, (taking 28 as the peak). I wrote about this arithmetic here earlier, which many people discussing mean reversal seem to miss:
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It is observed that when an indicator gets stretched to a higher extreme, it tends to snap to it’s lower extreme as well. Laws of nature work both ways. This phenomebon has been observed on the Nifty PE chart.
Past has shown lower extreme to be around 12.
@jamit05 Good to see you back here. 
Where’s @valuestudent?
We were waiting for NIFTY < 10K. Its here and let’s get to work. I won’t be suprised if NIFTY50 reaches 5100 (Mean - 2 x SD). But let’s not get too greedy here. Nobody has seen the future. Time is ripe for picking stocks already. No need to spend all the cash in one go. Averaging down helps in this market.
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Long term PE average is around 20 and more than 50% time is spent on range of 15-25 so hopefully we will get plenty of time to buy.
https://trendlyne.com/strategies/risk-reduction/index-pe/1887/NIFTY50/nifty-50/ (Risk reduction strategy)
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Hi
I think I should take some time off now from this thread. As the movements of the Nifty are brutal. I did not fathom such swift moves.
For the first time Nifty PE as reported by NSE has approached the median levels (technically a few bps away).
Most of the premise of VPers like @jamit05 @vasuadiga and co. have intuitively been reversion to mean. Correct me if I am wrong.
I think we will fill the stories for this reversion as Covid19.
Also I understand its important to pick stocks. But when markets collapse no stock gets pardoned. It is at times like these I feel it can be easy pickings in good names.
All the best for the coming days!
Stay positive & healthy.
Regards
Deepak
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I feel nifty is bearish for now and will take a couple of months to resolve. A fast pullback will only be a fakeout. Basically feel the buying zone to be there for some months now.
- Death cross formation on 20 day 200 day daily moving average has been achieved.
- 200 Day moving average broken
- Nifty 1400 day (4yr) moving average has been broken and nifty closed below it. 1800 day(5yr) has been tested at 8830 but no nifty close below it for now.
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Prices of Good mid-cap stocks are still heated. There is still exuberance, which should settle only after time correction.
Retail buyers’ vision is clouded by Recency Bias. After the recent crash, they find a particular stock cheap. But, in reality that is its deserving place.
For ex. some stocks that I am tracking are still expensive, or definitely not cheap… to pick one for example: lets see… Jyothy Labs Ltd.
Its a stock for the long term, good management and a good business, it manages money well, but its sales growth is poor around 6% in last three years. Bear in mind, that the market pays for growth and not for profits alone, hence I have assigned this mid-cap stock a reasonable PE of 13. With its EPS around 5, I consider this stock a reasonable buy at 65. But it is currently trading at 105 hence a further 30% correction is required.
This is a story with most of the stocks on my list.
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Sharing this old chart for study purpose.
This was generated on 28th feb 2020.
This was for personal study and I wasn’t expecting the market to touch 18k-19k levels within a month. However, today, at the time of writing this post, US market is open and has made a low of 18,917.46.
What I was trying to do?
US market was highly overvalued and when the fall started I was trying to find nearest major support and major support near fair value of US market. Lowest green line @ 18.3k is support near fair market valuation.
My opinion now -
Anything below 18-19k level will start turning US market to attractive valuations.
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In the last few days, approximately 2 trillion dollars worth of liquidity has been committed in support of aiding the financial markets ( 1.2 trillion by US, another 800 billion today by EU)
But the market is still falling inspite of these unprecedented measures, which is Perhaps akin to using cannons to kill mosquitoes imho!
Basically the market is telling that only a cure or a fall in infection rate will help stabilize things…
It also makes me wonder how the markets will react to this OCEAN of liquidity once coronovirus has indeed subsided eventually.
Will It be a v shaped recovery of 2009 (which was Kickstarted by the famous Fed QE program )?
Or will be in the doldrums ( L shaped recovery)?
Disclosure : looking to completely shift from debt to equities below nifty 8000 levels
(Please delete this if inappropriate)
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This is price correction in a Bear market, which will be followed by time correction.
Many stocks, even good ones, had flat earnings, and shown little hope for improvement in the near future. This becomes a lethal concoction when mixed with fact that these stock prices were trading at lofty valuations. Then came the trigger, and market quickly factored the reality into the prices. Nothing magical about it.
Now Nifty is around its average PE. Investment done now, will bear results better than FD+infaltion.
Let the games BEGIN !!
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Oh Finally! I was waiting for your assessment. Are you all in or buying in tranches?
Now since the fall has been so brutal are you going to buy quality which has corrected or the Mid+ Small cap which are available at reasonable valuations?
GARP: Growth at reasonable valuations is going to be the theme.
This forum has taught me to follow growth. Market pays for growth… not so much for cash on books, lineage, potential etc… So following:
Growth + Quality + Reasonable Pricing
Is going to be the theme.
Buying will be in tranches spread across a whole year.
Mid // Large // Small is not really a criteria because India is a growing economy. There is no predicting how much more bigger a good enterprise can get.
There are Growth Traps though… for ex. Pidilite.
Great everything… but currently growth is absent yet its trading at 60PE. So the question becomes what is a good buy price…
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The Core Idea is:
Growth stocks will be bought in these bad times, when growth is somewhat temporarily absent and as a result PEs have cooled down… 60PE stocks are expected to reach the lower range of 30/40 PE. This is for the sake of margin of safety.
Since, I am not too big on circle of competence, I will go with the popular names, Page, Pidilite, Dmart, HDFCs etc… the usual stock market darlings. The focus will always be future growth.
In essence, I wish to buy into future growth, without paying for it. No room for turnaround stories and cyclicals. I will leave that to industry experts. No ETF, No MFs, debt funds, Gold etc… no confusion, only plain growth investing.
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Infy is still higher than, CEO crisis. Nestle at 2.5x during Maggi crisis. HDFC at same level as NBFC crisis. Titan 2.5x demonetization .
M&M and ITC were much cheaper even before Corona crisis.
Just trying to give a perspective that for buying one doesn’t need complete meltdown of global markets. Good companies keep making lows which are higher than previous lows. Obviously current crisis gives a chance to buy Index at low levels.
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I believe the bottom will be in only when these stocks will give way. Ofcourse this scenario plays out only if you feel there will be an actual prolonged recession. If you feel that this is a blip and bounce back will be as good, then your theory would hold.
I feel relief rallies will continue to be sold into till US gives clear indication of a receding Corona virus.
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For long term investors, IT and Banking sector are now in a buy zone.
In IT sector: Hcl Tech in large cap, and Sonata Software in Small cap. Both are secular growth stories now selling at 10PE… aur kya chahiye.
In FMCG, tier 2 stocks are in the buy zone. But the big boys are still uptight. I am sure their investors must’ve tied their fingers crossed!
Banking is in the long-term Buy Zone.
Well, this time around it did take a meltdown. Had been waiting a really (really) long time.
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Update
Bearish View
- Death cross on 50 day 200 day is now complete. We are officially in a bear market which will take some time to beat.
- Nifty has violated its 5 year moving average Bears will defend 8850 very strongly in my opinion. The only thing is we cant assume a 10% upmove from today’s level to be a turning point in the market. We need to be very watchful
Bullish view
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A death cross in not a be all end all doomsday indicator. It can very well be rejected by the markets and we can form a sideways consolidation which eventually takes us out of this deathcross in about a months time.
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If Nifty come back above 8850 and stays there, a bottom may very well be in. The only thing im watching is, a fast recovery will be sold into equally quickly in my opinion.
I still believe the accumulation zone(8.5-6.5) to be there for a few months before we get to a meaningful level and stay there.
I posted this chart on August 2019.
In the long term market is a slave to earnings… Earnings need to match valuations otherwise market corrects to its mean. This has been proven again and again. I have given the updated chart below.
Normally we expect a good recovery after fall down… But we have seven quarters of falling GDP even before corona Virus came to picture… And Corona virus might dent the EPS even further in next quarters… So I’m confused which valuations would be appropriate…
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