September 23, 2010 7:33 pm
Is stock market over valued right now ?
How high can Sensex go before the crash ?
What do you think ? Why ?
A good and disciplined asset allocation strategy is a good way to avoid the twin demons of greed and fear. In that case, no level of market is different. Though it is a tough thing to do. Who said being in capital markets is easy!
My view on the present status of markets is that because of near-zero short term interest rates in US and other developed countries.
The P/E of sensex/nifty is above 20, that means the E/P is 5%. For the FIIs from those countries, 5% is quite ok so they should continue to buy India and other emerging markets, even at much higher levels unless something drastic happens. 🙂
i AGREE WITH MANISH AND JAGADEES VIEWS
I came across the sudarshan’s website he share a view —-
“There is a big joker sitting in the name of FII who is looking to get better than the treasury yields of the bankrupt US government. This joker has very close to zero cost of capital. He is happy if he gets 4% p.a. returns after adjusting for exchange rates, he is thrilled. You are looking for 24% return – that is the problem.”
sorry the above quote shared by subra in his blog
It will be very difficult to answer and to judge how high markets can go.
the probability will alway be there to go high and the probability will always be there to come with a news that is making our markets volatile.the only one factor which makes our market undecisive is we do not have enough domestic participation that too long term to really make our market stable at one point.
So what next at Sensex?? where does it stop??
Everyone is making guess….because we are not sure till when the liquidity remains.
i draw attention to following points;1. though idian economy is said to be in better condition than developed world, indian currencies is cheaper by 10-15% than what it was in 2007 last quarter,and so indian shares to them now. 2. if the ‘morninggstar .co.in’ p/e forward for any equity mutual fund is to be trusted, now hovering above p/e of sensex/nifty may come down in coming 6-9 months.
i am puzzled by advocating sip route when it comes for ways for fears of sumps/turmoils as of 2008. it is alright for investing regular saving. but once it is invested and becomes corpus, then how will it save ? what i mean though timing is not that important to investor as for traders, some stretagy to be out of the equity market (though not out from investment ) during upheal time could be beneficial. though i did not test it, i have some thinking that during such time i.e high p/e , say higher than 25, one could transter equity to debt with preplaned strategy agin to reinvest the whole corpus to equity through monthly sip/sip based on p/e change in say 1 year or so.
Oh God Manish! If I could answer your question correctly I would have minted money. Nobody knows what a woman wants and it is same with the stock market. You can never predict how will it behave. In Jan 2008 nobody imagined that sensex will go down to 4 digit number within a year. One month back all the ” experts ” were talking about sensex being at 16,000~18,000 level. Today we are at 20,000 plus. May be tomorrow we will be at 25,000 plus or 15,000 minus.
Market timing requires two perfect things: one WITHDRAWING HIGH and another INVESTING LOW. If we make mistake in any of the one, the cost of mistake is huge.
Umm… Really good question, same question questing in my mind from past few days.. I see bullishness only limited to Big shares mostly may be no crash expecting current level around 20K but corrections will be possible to buildup stable base..Since current bullish due to FII’s, I guess their disinvestments are based on international economy as well not only just Indian Market’s performance. So our market will become more sensitive w.r.t international economy… then we could see lot of corrections or up&downs.. I guess if it takes 6 months to touch 25K then there would be some danger.. If takes 12 months to cross 25K may not much worry… what do you say..? Let us see how it goes this time.. And fearing the bench mark numbers can lead to crash as well (suppose if everyone take 25K or 30K as threshold benchmark, every one will start selling their stocks in one shot so instead of normal correction it may turn to big crash..).. Anyhow crash is compulsory one day let us ready for that any day..
To be frank I have entered the markets for the first time this year in first week of June when they were around 16K. The best part of the whole story was the day market touched 20K I sold of 90% of my holdings being of the fear that they would dip but frankly dip would not happen atleast before DEC as Q2 results are going to be out very soon and most of the companies would have had a very strong Q2 performance. But neither I am an astrologer nor an analyst but I think markets have their own mind and till the FII’s keep pumping in money and making profits any level is possible.
Why we are trying to predict numbers? Till date, no one is able to predict them accurately every time. yes, it’s easy to talk on round figures like 22000, 25000, 15000 etc.
The simple rule is, if you’re a mutual fund investor, go for SIP in disciplined manner – whether sensex comes to 8000 or 25000.
If you’re dealing in stock market, always make a strict stop-loss & go for your routine work. Watch out technical levels very carefully.
Hope it will help you.
Nice discussion going on. I dont think there will be any crash in the coming year. You are right in saying that it i not proper to predict the levels of sensex either mine 22,000 level or yours 25,000 level. One thing i would like to remind is that Nift PE is hovering around 25 which i feel is at very high level. But given the momentum of the markets, it can go to crazy levels.As rightly pointed out by other member mid and small cap stocks are yet to show their performance. And i know for sure that FIIs have started looking at the mid cap stocks. The second quarter results are very important to the markets. If the corporates show average to above average level of performance i feel 22,000 level will be easily broken. But if the results are below satisfactory i feel the markets will lose momentum and will hover around 18,000-22,000 levels.
If in the coming months there is any meaningful correction, it will be very healthy for our markets. I for once see no big crash as that of going back to 8,000 levels unless there is double dip recession in US, banks start failing again, and poor results from our corporates.
Agree on Nifty PE being high , but somehow I feel thats the conditions are such that it can get streached till 30 this time , just a gut feeling 🙂 . Also wanted to know if there is any public place where we can get data that FII are flowing money in Midcap space ? or you are looking at some midcap stock data individually and concluding 🙂
Even, i think in the same lines as Manish and Jagadeesh had said. If the market sutains above its previous highs of 6300 for couple of sessions then it might shoot up. The same thing has happened lot of times on breaking key resistance areas. The recent example is the BANKNIFTY, where once it crossed previous high of around 10800 and trading for quite some time in that range, breaks it and shoots up to 12000 in no time. So we can expect something on the lines in other stocks as well, provided global markets are stable.
The biggest worry is the performance of US Markets. We can’t (rather I don know) how it behaves. So i am keeping my fingers crossed as well.
But I am not sure how much should we be worried about coupling with US markets , in last year , Indian markets have come up beautifully , however other markets in the world have not done that well like India and US is one of them .
Dont you think India will not be much affected this time because of bad performance of US ?
Its true that we somewhat decoupled from US. But my opinion is, this market rally was mainly due to the FIIs, if US market enters double dip then FIIs will run away from indian markets leading to crash. But our long term growth story is intact and hence our market will bounce back. so i feel
– Market participant with short term goal(2-5 years) can book profits if PE crosses 25.
– Market participant with long term goal(>10 years) can leave investment for compounding and if crash happens he can accumulate more.
– Market entrants can wait for the correction to start investing.
Above said an individual should constantly look and make shortlist of companies with strong potential with good management so that if an opportunity arises he can make best use of it 🙂
what do u guys think?
In a globalised economy, there can’t be absolute decoupling. My sense is that india can outperform US by some extent but will the indian market hold its groove if there is a failure in US? That is very difficult to happen given the tendency of FII’s to look into safer instruments like treasuries when there is a fear going around.
Having said that, even i believe Indian markets have something more left on the upside. Generally Markets , from a psychological point of view will always surprise. If all the investor community is thinking about one way, the market will surprise at that point and generally a rally (either bull or bear) will end at the point of highest euphoria. Even in the way down there was lot of euphoria at 8k-10k and the markets surprises everybody and bounced back. Even this rally of 18k-20k was upto many persons surprises.
I feel that sensex will go further. For a crash to happen we will usually see surge across all 3 spectrum – large cap, mid cap and small cap. At this point only large cap is moving fast(thanks to FIIs cheap money), whereas midcap and small cap index are 20% below its all-time peak. Now market is in zone of irrationality and predicting its upside movement is futile process. My feeling is that sensex will go upto 22k-25k before the crash 🙂
Exactly the way I have thought 🙂 . Yes , midcaps are place to be in right now .
5350 – 5450 must hold … otherwise a big crash …
But in short term.., till it is above 5800, 6500 is possible
I would like to see it from close and would like to judge the movement based on what happens around 6300 on nifty , as it was the previous high , If markets can sustain above it for couple of sessions , then the best idea would be to deploy some money with a 6 months view else sell everything and move out of markets to come back only after a cool off .
My strategy wud be to sell 10% on every rise from now onwards… and get 50 % in Cash till weakness emerges.
A very sharp dip will come within 2 months… deploy that Cash for higher targets.
I think the markets will cross over 22000 this march, and then stabilize between 18000-22000 range. I dont think there will be any crash but meaningful correction, which will be healthy for the markets.
Are you sure on that ? I mean do you want to revisit what you said , as 21k is the highest on Sensex and from that point most probably markets would either fall down or move much up , but should not hover around it for long term .
I do not want to get into predicting business , but my gut feeling says that markets will cross 21k and might reach 25k and then there can be a big crash which can take markets to 8k again 🙂
@ manish going back to 8k … ? i personally think that has a very small probability of happening … I would actually be very surprised if the Nifty went below 5k … !
Excellent article! Historical analyst number for 2008 user very smartly to make the point that forward earnings can’t be trusted. Importantly, basic common sense tells us that in this economy earnings are not likely to exceed prior peak levels from 2007. But the analysts are predicting just that. Meaning the economy is intact or ever a bit better after passing throug the works econ. crisis. One number that defies this assumption quicky is unemployment, u6 at 16.5%.
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