Will Market fall now?

Few of the subscribers are asking these questions to us:

  1. Market closer to all-time-high in 2008.  Will it crash?
  2. Should we sell all holdings & buy later?
  3. What is the peak level according to Futurecaps?

Our quick-answer is NO!

We expect NIFTY should reach around 7500 levels, the target year should be 2016.

Research

According to our research, Market crash is tied-up with economy.  Whenever the economy is over-heated through boom, market start to crash.

Usually, market will crash 6 months before the economy bust.

Measure

We use NIFTY PE Ratio as the economic barometer.

There is a period of 8.4 year cycle going on this parameter.

image

You can see that the NIFTY PE RATIO in 2008 was around 28.

NIFTY PE RATIO in YEAR 2000 was around 28.

IN BOTH CASES MARKET CRASHED!

CURRENT NIFTY PE RATIO IS 18

Advice

We advice you to buy quality scrips for long term holding.

There can be slow down during election period.   The economy is improving & we expect 30-40% advancement of market from current level.

NIFTY PE RATIO might reach 28 level once NITY INDEX is above 7500.

Note

One may ask, Why NIFTY PE RATIO did not increased even after NIFTY INDEX reached 2008 level.

The answer is:

  1. NIFTY PE RATIO is calculated based on PE Ratio of 50 scrips.  Their earnings determines the AVERAE PE RATIO
  2. Banking Stocks lows contribute to the NIFTY PE RATIO lows
  3. Inflation corrodes value of earnings
  4. Currency Depreciation corrodes value of earnings
Advertisements

2 Responses to “Will Market fall now?”

  1. Praveen.R Says:

    First of all I would like to Congratulate and Thank You for such a wonderful blog. The content, presentation style and analysis is extremely lucid and clear, you are doing a wonderful service for newbie investors like me.
    Now that the Nifty has already crossed 7900 level, though PE ratio is still little less than 21, does this still leave much higher headroom to grow and hold please?

    • Editor Says:

      Thank You Praveen for the good words.

      As per our calculation, NIFTY should grow 30% more from here in 1 year.
      Then we have to watch for US Market for the first signal of crash.
      If economic bust is confirmed, start selling over-valued stocks incrementally.

      Regards,
      FC

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s


%d bloggers like this: