Mar 13


Print Friendly, PDF & Email

I usually do not hazard guesses. But the landslide victory of the Bhartiya Janta Party(BJP) in the biggest electorally meaningful state of Uttar Pradesh, day before yesterday seems to compel me to WARN INVESTORS because stock market pundits and soothsayers will start building stories to befuddle you.

First the victory of the political party. It only tells one thing. Indian political firmament has changed. There will be one major party for a long time. All other opposition has been reduced to a regional status. And the sole reason is A STRONG LEADER in Narendra Modi.

He is honest, bold, intelligent, charismatic, decision taker, empathetic, disciplined and a good communicator. That is all what is required in being a good leader, a good CEO. India’s luck has changed.  What he is able to deliver is a different story because that has infinite variables. People of India and the society at large has to change for deliverables to be visible. A morally decadent and corrupt people cannot become a great nation, is my personal opinion. Unless we learn to obey rules and laws and bring the rule breakers and law breakers to book in a swift and visible manner, we will remain a story with potential irrespective of Narendra Modi or Amit Shah, the president of BJP. It is the same Indian who drives in a wrong lane with impunity, drives drunk and without helmet, kills people in road accidents and then gets away with it and expects the others to be honest and straight forward. We behave in other countries as NRIs or PIOs because we can be deported from there, because we can be sent to jail, because we can be exterminated by the local town community if we do not subscribe to their moral norms. But we take India for granted. So we can’t be a great nation. We will be a rich nation, we will be a populous nation, we will be a happening market, we will be militarily strong. But great? That’s very very far as of now. We the people have to make it a great nation not Shri Modi.

Now the markets. 14th of March 2017 will have the markets shooting up. Nifty may even cross previous all time high of 9100. And in a few months time we may see 10000 on Nifty this year itself. But the euphoria and narrative of pundits needs to be toned down. They will discount elections of 2019, they will say India will have stability for next 7 years blah, blah, blah. But black swans can happen.  End result — markets will be over hyped. They will move further from reality. And the reality is the bottom line of businesses. Unless profits are made stock prices will be unsustainable. The Mutual Funds are sitting on huge cash. The trickle of SIPs is increasing. All of them have to invest and buy stocks. That itself will take the market to fresh highs.

But as a value investor, you need to be warned and cautious. Stay invested but for fresh investments wait for the opportunity when post new highs the markets crack heavily. Markets will ultimately realise the truth and be the “weighing machine” instead of “voting machine”. Some random event will be the trigger for the crash. It will crash back to around 8000 levels. Wait patiently for the same to again go bargain hunting. 

Till then Hasta La Vista……



Skip to comment form

    • anz on August 2, 2017 at 4:09 pm
    • Reply

    Dear Sir,

    Long time no see. Hope you are keeping well.

    Your prediction has come true. Nifty and Sensex both have flown much much higher. A recent study by Dev Ashish of says the following :-

    Nifty 50

    P/E – 25.1 (24.3)
    P/BV – 3.58 (3.59)
    Dividend Yield – 1.05% (1.15%)

    Nifty 500

    P/E – 28.7 (27.9)
    P/BV – 3.38 (3.38)
    Dividend Yield – 0.98% (1.07%)

    Figures in bracket are of the previous month (June 2017).

    link –

    Notice that the average PE of Nifty 500 is a staggering 28.7. Base rates of good returns in such scenarios is very less. With such rich valuations, its much reasonable to expect a correction. However, its been 6 months to 01 Mar when you predicted the rise and no sanity seemed to have returned to the markets. With GST implemented, large influx of FII money and unprecedented push to infrastructure by the govt, the soothsayers are giving predictions of new high each day.

    Here is where the emotional discipline of a Value Investor comes in. Patience is the key., that being said, no one knows when will the markets fall with a strong leadership at center and little/no political turmoil in near future. So we may see new highs each day and this madness may continue.

    This brings me to my query. For a long term investor (I like to call myself that, don’t know whether I qualify or not), As I see it, I have two choices :-

    1. Analyze my portfolio. If it contains high quality businesses with moats, which I think it does, Do a SIP-type investment in my own portfolio and forget about the Market. Advantages – no market timing, regular and increasing exposure to equities. Disadvantages – High Valuations, may take a long time for multibagger returns, reduced ROI.

    2. Just do an SIP in a liquid fund of all of my investible corpus. Continue till market crashes. Deploy in a graduated manner to scoop up bargins. Advantages – Able to get high quality businesses dirt cheap in future. High chances of good ROI. Disadvantages – Dont know when that future may play out. Need adequate time Period AFTER that to get returns. This may be 4-5 years in future or even more.

    What should I be doing?

    Note – along with this, my Boring and Dull SIP in PPLTVF continues, irrespective. Almost all of my speculative corpus goes to CryptoCurrencies. I alrady have adequate Term Insurance and Adequate Emergency Fund of approx 200k.

    Views are welcome.

    Anshul gaur

    1. Dear Anshul
      I have been silent on the blog as the markets were over hyped and I did not want to tell people I told you so.
      The test of an Intelligent Investor lies in controlling the emotions when all around you are losing their marbles. The market can remain insane far longer than you can remain liquid.
      Ever since NIFTY crossed PE of 22, I became skeptical. The fall will be brutal whenever it happens. The markets are testing your patience by not coming down. As and when small retail investors think they have missed the bus and buy at high prices they will be slaughtered.
      I would suggest stay invested with good stocks bought cheaper earlier. For the rest keep your money in your bank account/liquid fund. It should be available to you at short notice to buy. This market will give opportunities and big opportunities. Be patient.

        • anz on August 7, 2017 at 8:03 am
        • Reply

        Thank you sir.

        1. This means all additional investment at this juncture may go to a liquid fund. Any suggestions in the same (which fund, any other imp pts)

        2. Further, how does one identify a stock market crash? What the defining line between a correction and a crash? Also, any suggested methodology of investing in crash (Staggered/ lump sum and if staggered then suggested distr) ?

        3. I have a model of investing 20% of crash fund on every 1500 drop on pts till 60%, then deploy all at that juncture (ie 3 graduated dply of funds at a fall of 1500 pts each and then deploying bal 40% at the next drop). Is it correct or any other suggestions?

        I know sir, I am pestering you, but you are the only ‘fin advisor’ whom I trust.

        Anshul Gaur

        1. It seems you are the only Eklavya here. But never mind, one Eklavya is enough to make Drona immortal. Levity aside, any liquid fund is fine. I would rather keep it in a flexi savings account with sweep in and sweep out facility from a FD. It will give about 6-7% return. Because the time period of that correction or crash seems to be three to four months away. Again I am biting more than I can chew by taking a guess on time.
          A correction would be about 10-15% from present levels and a crash would move the indices back to 16-18 PE multiples of the index. In simple terms from present levels a correction would be about 8700-8600 on Nifty and a crash would be about sub 8200 levels.
          I would rather suggest to keep a buy list ready at a price which is fair. For example I will probably start buying Godrej Consumer Products in a big way if it goes below 860 or so. Invest 70% at this level and after that I would keep investing 10% of my investible sum at every 3-5% drop in price.
          So you can formulate your own strategy for that based on your comfort zone.

            • anz on August 9, 2017 at 8:17 am

            Dear Sir,

            I am humbled and honoured both at the same time by you elevating me to your Eklavya. I have been able to see this far sir, its only by climbing on shoulders of giants like you. I only try to follow what you teach freely.

            If only you could see how your guidance has changed my life for the better, how it has kindled fire of my old passion, reading, in me coupled with my love of exploring the exciting world of personal finance.

            Will let you in a bit of a secret sir. You remember what Jason Zwieg writes in the preface of The Intelligent Investor, about reading it the first time. He says, I envy you the excitement which you feel when you read it the first, the second or even the third time. I feel the same excitement when i visit and revisit and re-revisit your blog. And I jump like a toddler getting a new toy every time you answer a query of mine.

            I shall keep on pestering you, relentlessly sir, even to the extent of it becoming annoying. Till the market falls, I am going to keep myself busy with learning how to value a business and then write down my thesis along with the rationale on each stock and send it to you. And I would wait for your comments and suggestions, but then will sleep on it and proceed to buy, only if it is in my circle of competence and passes my checklist.

            Anshul Gaur

            • Fauji on August 10, 2017 at 3:36 am

            Thankyou Anshul for the kind words. Do keep reading and thinking. And yes I shall answer to the best of my capabilities , experience and wisdom

Leave a Reply

Your email address will not be published.