With 2 quarters of results impacted by Corona, Nifty EPS is around 363 per index. Translating to 37 times PE on a trailing twelve month basis.
RBI hasn’t cut rates in last 3 meetings, and if they didn’t cut at the peak of the pandemic, it’s highly unlikely they will cut rates when the vaccine is coming out. And with SC stance on loan moratorium, it’s highly unlikely that we will see any relaxation on that front by the RBI.
What exactly is going to take the markets up from these levels, outside of pure momentum?
This is about the time when market starts looking forward to the budget - but considering the fiscal situation, it’s highly unlikely we will see a market friendly budget. Especially considering the insipid budgets we have seen from Nirmala Sitharaman last couple of chances she got, and the big promises she made, of trillion dollar infrastructure plan, etc, which never materialized.
Large companies like Reliance and TCS that have the power to drive up the index seem to have run out of steam. The rally in banks clearly is far beyond reason, because on the ground the situation is actually worse than it was this time last year. Some sectors like Autos, may see a fresh lease of life - because of the impact to the sharing economy caused by the pandemic - but the stock prices have already run ahead.
All the high dividend yield stocks which could have offered a safe haven have run up significantly - so there isn’t much safety in those names too. A stock like Vedanta that was an excellent buy in the 90’s is not as attractive over 130.
This seems to be a liquidity driven rally, largely in sync with global markets. And when we consider global markets, there are 2 major problems looming in horizon. Time is running out before US Congress breaks for Christmas - and it looks increasingly like there won’t be a stimulus before Christmas - which means, it will not happen till Biden takes over. And the Tesla inclusion is going to be a major dent to the S&P - because the higher Tesla is when it goes into the index, the more of the other 499 names index funds need to sell - plus Tesla itself will go down post inclusion. The impact to S&P 500 just by this inclusion could be as much as 5% post the 18th.
With this sort of background, it simply doesn’t make sense for investors to stay in this market. Nimble traders can hope to ride the momentum till it turns - but from these levels, any turn could be nasty.
Unless you have a strong stomach, better to watch from sidelines. From these levels, chances are there isn’t much upside you will miss out on!
RBI hasn’t cut rates in last 3 meetings, and if they didn’t cut at the peak of the pandemic, it’s highly unlikely they will cut rates when the vaccine is coming out. And with SC stance on loan moratorium, it’s highly unlikely that we will see any relaxation on that front by the RBI.
What exactly is going to take the markets up from these levels, outside of pure momentum?
This is about the time when market starts looking forward to the budget - but considering the fiscal situation, it’s highly unlikely we will see a market friendly budget. Especially considering the insipid budgets we have seen from Nirmala Sitharaman last couple of chances she got, and the big promises she made, of trillion dollar infrastructure plan, etc, which never materialized.
Large companies like Reliance and TCS that have the power to drive up the index seem to have run out of steam. The rally in banks clearly is far beyond reason, because on the ground the situation is actually worse than it was this time last year. Some sectors like Autos, may see a fresh lease of life - because of the impact to the sharing economy caused by the pandemic - but the stock prices have already run ahead.
All the high dividend yield stocks which could have offered a safe haven have run up significantly - so there isn’t much safety in those names too. A stock like Vedanta that was an excellent buy in the 90’s is not as attractive over 130.
This seems to be a liquidity driven rally, largely in sync with global markets. And when we consider global markets, there are 2 major problems looming in horizon. Time is running out before US Congress breaks for Christmas - and it looks increasingly like there won’t be a stimulus before Christmas - which means, it will not happen till Biden takes over. And the Tesla inclusion is going to be a major dent to the S&P - because the higher Tesla is when it goes into the index, the more of the other 499 names index funds need to sell - plus Tesla itself will go down post inclusion. The impact to S&P 500 just by this inclusion could be as much as 5% post the 18th.
With this sort of background, it simply doesn’t make sense for investors to stay in this market. Nimble traders can hope to ride the momentum till it turns - but from these levels, any turn could be nasty.
Unless you have a strong stomach, better to watch from sidelines. From these levels, chances are there isn’t much upside you will miss out on!