Unless you find beauty in walking away, you shouldn’t walk
away from this beauty.
I clearly remember Modi’s swearing Assembly.. I was at work
and everyone was going long and buying Calls; Nifty had closed at 7367 last
trading day and opened at 7428; remained at 7400s and suddenly fell back to 7300s.
I was hoping a bullish trend like many others, now that Modi
was officially our Prime Minister, but I returned to work next day to Nifty still
at 7300s and difference of a billion traded shares (168599276 shares from 26th
May’s 273236339).
If noticed, an all time high of Nifty (in its 7500s) and
Sensex (in it’s 2500s) have only been witnessed on 16th May 2014 and
26th May 2014 (until 5th June 2014); Election Results Day
(Modi’s victory) and Modi’s Swearing Assembly respectively.
It clearly is MODI WAVE! Known for his pro-business
attitude, business-friendly policies, speedy clearances; He was everyone’s
favourite horse to bet on, be it a Gujrati or a foreign analyst. Then why did
the prices fall later?
Because everyone was booking profits. So, would investors be tempted to book profits
again and exit the markets?
Probably, but so what? Isn’t that what Stock Markets are all
about? Buy and Sell, Long and Short, Call and Put? A fall (and rise) in market
prices is as inevitable as the scorching June heat in North India and as
routine as a January blizzard in Colorado. If you are prepared, it can’t hurt
you. And when else must you buy stocks if not when prices drop? How else would
one make gains?
Sensex and Nifty are the Indexes of the most famous Stock
Exchanges of India – BSE and NSE respectively. The following Charts show us the
current P/E Ratio of Indices, Nifty and Sensex. P/E Ratio is the price (in
Rupees/Dollars) an investor is willing to spend for each rupee/dollar earned
from the investment.
NIFTY P/E RATIO 2014
Date
|
P/E
|
P/B
|
Div Yield
|
Close
|
||
1 Apr '14
|
18.91
|
3.24
|
1.37
|
6,721.05
|
||
16 Apr '14
|
18.79
|
3.22
|
1.38
|
6675.3
|
||
23 Apr '14
|
19.2
|
3.3
|
1.34
|
6840.8
|
||
30 Apr '14
|
18.79
|
3.23
|
1.37
|
6696.4
|
||
07 May '14
|
18.56
|
3.18
|
1.43
|
6652.55
|
||
30 May '14
|
19.82
|
3.43
|
1.34
|
7229.95
|
||
2 June '14
|
20.27
|
3.5
|
1.31
|
7362.5
|
||
10 June '14
|
20.86
|
3.62
|
1.26
|
7656.4
|
||
(Source: http://www.bseindia.com/)
Currently, markets are behaving like an ocean on a full moon
night taking both the small boats and the ships, to the top of its tides. With
Sensex at it’s current P/E Ratio of 18
and Nifty at it’s current P/E Ratio of 19(average),
is definitely a country and an ocean away from “cheap”.
Credit Suisse’s Robert Parker thinks going long India (and
short China) was a good investment decision as the markets were cheap
yesteryear; now markets appear expensive, slightly over-bought and up by 20%,
which is when investors would want to book profits.
Whether over-valued or not, investors apparently are willing
to pay more expecting the market to outperform, causing the P/E Ratio to have
moved up 16 times from last year (Sensex). Nevertheless, India definitely has,
very proudly, managed to take off it’s tag of “Emerging Markets”, “Fragile 5” and
other Acronyms like BRICS while riding the bulls.
The following Comparison Chart shows India (INP) outperforming
all other “Fragile 5” economies and iShares Russell 2000 Index Fund (IWM); where INP- India,
EZA – South Africa, IWM – USA, EWZ – Brazil, TUR – Turkey, EIDO – Indonesia.
(Source: http://www.etfscreen.com/etfperf.php)
Indian Rupee (INR) has trekked the top of the mountain from
its spot of World’s weakest currency last August against the dollar (USD/INR –
Rs 69) to a very stable and consistent USD/INR Rs 59 for some time now. GDP
Growth is presently at 4.6%. WPI is at 5.2%,
Raised interest rates, a dollar-swap program, narrowed CAD,
whether that was due to more demand in exports from a fallen Rupee or/and due
to oil and gold import curbs imposed by the Government, a pro-business ruling
party, easing inflation and a stable currency have resulted in attracting money
through FIIs, and helped our markets to rise.
Year
|
GDP
|
USD/INR
|
CAD
|
||
1999
|
8
|
45.9
|
-4.1
|
||
2000
|
4.15
|
45.7
|
-2.7
|
||
2001
|
5.39
|
47.7
|
3.4
|
||
2002
|
3.88
|
48.4
|
6.3
|
||
2003
|
7.97
|
45.9
|
14.1
|
||
2004
|
7.05
|
45
|
-2.5
|
||
2005
|
9.48
|
44.3
|
-9.9
|
||
2006
|
9.57
|
45.2
|
-9.6
|
||
2007
|
9.32
|
40.2
|
-15.7
|
||
2008
|
6.72
|
46
|
-27.9
|
||
2009
|
8.59
|
47.4
|
-38.2
|
||
2010
|
8.91
|
45.6
|
-45.9
|
||
2011
|
6.69
|
48.1
|
-78.2
|
||
2012
|
4.47
|
54
|
-88.2
|
||
2013
|
4.86
|
61.5
|
-36.8
|
(Source: CSO, RBI, EAC to PM, Ministry of Finance
Enthusiasm has returned to India,
with a lot of NaMo slogans and bulls. If this is not the time to go long, then
you could be waiting on snowflakes, just to realise the window was shut.
Pessimists might worry about
investors’ exit, but that’s the thing about Stock Market.. it’s a Zero-sum
game. Someone’s loss is equaled by someone’s gain. Just as a longer winter in
the hilly terrain upsets farmers; thrills Hotel industry.
Depreciated INR results in a
happy exporter, a rapturous expat; meanwhile vexes citizens planning
trip/studies abroad, importers, etc.
Nevertheless, India (along with a
few other “Emerging markets”) has proved every short-EEM and catchy Acronyms
lover to be someone who was listening to a “Song of Deborah” and
condescendingly kept judging it as a tune of “Taps”.
