Weekly Market Recap
This week market set-up remained buoyant and indices scaled-up to new high. Despite, over-valued on long-term average earning multiple, market doesn’t seem to be stopped here. Although, on Thursday Nifty corrected more than 100 points and closed at day’s low, it was expected that pull back will continue on Friday, but market bounced-off and recoup all of its losses and managed to close the week in green.
The Nifty ended the week with a modest gain of 82 points or .73% before closed at 11360, and Sensex gained 219 points or .59% to settle at 37556.
Current Outlook
I believe the charts of fundamental data are as useful as price charts in helping us visualize fundamental context and trend. In the case of earnings, the given link https://nifty-pe-ratio.com/ shows us where the Nifty50 had been in last 20 years. In the past, Nifty PE went over 28, in February 2000 and January 2008, based on last closing Nifty PE is 28.23. Some call this new normal, but I think we should wait for some more time to call it new normal.
How the drop in PE shown is possible? Well, I think the best case scenario is earning improve going forward and price don’t appreciate from here, or price drop from here and earning remains the same. Let’s wait and watch carefully for the forthcoming action.
On the other side, I have observed that the sector or stocks which have been consolidating or in corrective mode since last 3-4 years have shown a sign of resurgent which can be consider as buying candidate.
Conclusion
Market, especially Indices are very bullish. A correction would be nice, but it doesn’t seem to be forthcoming. Though, Fundamentally Nifty is well above the normal value range and is extremely over-valued. Historically, overvalued conditions leave the market vulnerable for a large correction or bear market. The current conditions are not a signal for immediate action; rather, it is part of the context in which we should view the market during the process of making decisions.
I welcome any feedback you may have about the content of this article.
Trade or Invest Patiently ..!!; Be a Savvy Investor..!!
Pankaj