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POSTED BY ON October 4, 2010 12:54 am COMMENTS (5)
Hi,
What do you think is the reason why the market is not falling even though most of us about high valuation, bubble etc…
My take on the reason is: Retail investor by and large missed this bull run and most of them who had positions would have sold at least half of their Portfolio by this time ( I admit that I encashed half of my portfolio in the last 1 month in SWP).
It looks like only FII are investing now and even DII are mostly net sellers.
If the market is gonna fall from here it will be FII who will be losing the money (in fact they won’t lose money they will make less profit) so they should be waiting for the retail investors (SCAPE GOAT) to get in so that when they sell there will be somebody to buy it.
The way the IPO’s are getting over sub subscribed (Remember couple of months back the company’s were providing 5% discount just to bring in retail investment now the scenario is different) it clearly shows that the retails investors are feeling pinch and want to get into share market.
so I think the market would fall the moment retail investor talk about buying xyz stocks just because it doubled in week time. What is your opinion on my take?
Note:
I am not a pro in stock market this is just my personal opinion. I may be wrong.
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The discussion seems to suggest that FIIs are super-sharp and always manage “as a group” to outwit DIIs “as a group” in the markets. And both outwit the retail investors “as a group”.
I dont think so. There is a dynamic buying-selling between all 3 groups and other groups and no group can be the clear winner. Only one thing is clear, the market will always behave in a manner which is not consistent with the overwhelming majority of the players (whether those players are FII,DII or individual). If the overwhelming sentiment is strongly bullish, then the markets will either behave sideways or bearish or even slight bullish but never strong bullish. This happened in late 2007 as well as early 2009. It happened in last 6 months and will always happen in future.
Bull and bear phases of the market are normal events. You can always have a 20/20 hindsight vision as well as the propensity to project the recent short-term into near and distant future.
As a retail not-so-savvy-stock-selector investor, I would be much better invested in a equity MF rather than individual stock picking or trying to time the market.
Ramesh
What you said. Valuations have been inconsistent with the price runs on a lot of the stocks in this rally. It would be funny if not for the money; there is a table on http://www.great-stock.com that showed stocks “most likely to go up” and they were almost all negative…
Wait a month or two more and we’ll see where this trend goes.
may be fii are expecting good earning growth in indan company shares.e.g if you go through ‘morningstar.co.in’ site p/e forward for hdfc top 200 fund is 16.87 v/s p/e of the same fund by ‘valueresearchonline’ is 22.9. it means the ‘morningstar.co.in’ analysts expects earning growth by 35% in 1 year period! if even half is materialised, the today’s prices are justified! am i wrong? or wrong interpretation? one more thing , indian currency is at least 10% cheaper v/s major currencies compared to last quarter of 2007, so the indan shares to them. trailing year nifty 50 earning is at least more than 9% than as on dt.08-01-2008! nifty 50 is at @17% above 200 dma ,which is safe! and p/e of nifty 50 is @25.6, which is slightly lower than 28.5, previous high. and if the morningstar analyst’s expectation comes true, it will come down sooner than latter!
Most of the retail investors have a feeling of left out in this rally. Usually FIIs and DIIs invest heavily and take market to higher level. Then the greed factor comes in and retail investors start entering the market and are caught. Retail Investors need to control their greed. A good example is the crash of Jan’ 2008.
Rakesh
@Rajendran
I dont think that FIIs are waiting for the retail participant to kick in. FIIs are pouring money mainly due to availability of cheap credit in developed countries and attraction towards good growth prospectus of emerging growth market.
I feel the trigger point for the crash will be due to the failure of the recovery in developed countries or may be due european countries debt crisis. Even last time the crash happened due to US credit crunch.
Its always difficult to predict when and how the market will crash? (for e.g. In US most of the people know that the housing bubble is forming by 2004-2005 itself. but it took 2 years for the bubble to burst). In market always expect the unexpected 🙂
so if you feel that market is overvalued, just encash it and stay out & watch the show 🙂