Hi Rajan, do you think the correction is over?  Nifty PE is still just over 25 !!

Hi Rajan, do you think the correction is over?  Nifty PE is still just over 25 !!

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Hi Rajan, do you think the correction is over?  Nifty PE is still just over 25‼️

✅ That’s a question which I got thrown at me by a friend. He for reasons of his own, believes I may have a better view of the future than he.
Well, after giving up my job in the financial services industry, I am no longer conflicted to keep giving different reasons on why those hapless retail investors should continue investing in equity funds irrespective of valuations.

Maybe that’s why some of my friends believe I will offer them a honest view considering I don’t charge any fee or commission for it and neither does my salary or bonus depends on it.

Therefore I will only tell you what I do with my money – NOT what you should with yours ‼️

OK ! So what is my response to my friend’s question❓Here goes …

I don’t think this was a correction- it was an event triggered off by Cboe VIX based algo trading in the US which went haywire …. (driven by fears on Fed interest rate increase).
This sharp move seems to have bottomed out at least for the moment.
However, as for the Indian Market we have merely gone from being “highly over valued” to  “over valued”.
✅ My portfolio has overall exposure to equity as an asset class of 20% .
(Even this is only because, one does not wish to completely exit the market lest we completely miss out any upswing and the hope that, in the event of a correction, the market will revert back in an Year) 
I don’t intend taking my allocation to the equity asset class up, till the PE is at least around 20 and the Div Yield Ratio converges closer to the PBv. Even the GDP is also almost equal to Sensex market cap.

In my view, from any angle our markets over valued.

I don’t expect oil to go down to $30 pbd in the mid-term or the RBI to reduce Repo Rate.
After SBI’s reputation went down in tatters for  repeatedly telling us that,”the worst is over”; I am not even sure that the PSB NPAs are over with and nor do I see corporate earnings to have shown a secular growth trend.
The Fed, ECB and the JCB are itching to increase and thereby normalize interest rates – so that, they have the space to stimulate the economy (by reducing rates) when the economic cycle turns down ( may be in 18-30 months?). Because, other wise they have to push more cash in the (already flushed) economy- risking hyper inflation (as in post WWII Germany) —— they have already established that “negative interest rates “ DO NOT work !
I have no doubt that these Central banks will act sooner than later – the liquidity freeze and market panic what we saw this time, may well play out on a larger scale in the future.

Will the Indian Market get “decoupled” from the US and rest of the developed world⁉️

…..that’s the new story being pushed around by some fund managers, stock brokers and presstitutes!!
I believe it’s a ludicrous idea stemming from their greed for AuM leading them to prey on hapless retail investors.
Look at how the retail investors rushed in to invest in “Balanced Funds” (I am not sure if they know that, these have 65% Equity – and are hardly “Balanced”)  in such an over valued markets.
History has shown that, there can be no earnings for a long time when investments are made in over valued (PE 21 and above, TTM) markets – who am I to challenge history lessons? Whilst those selling these funds are already laughing their way to their banks; for the hapless retail investors it may be years before they make money on these investments (that is if they don’t lose in a correction)‼️

✅ Honestly, I would be damned if I were to pretend knowing  what happens to the market or even what to do next!!!

I believe the only difference between these so called “market experts” and us folks is that, the experts have considerable resources to come up with many more reasons to justify their mistakes.

✅ The Indian Market will indeed follow the global markets‼️

It’s only my gut “feel” that, it’s NOT a good time to be over exposed to equity as an asset class ( of course if you can pick Value in individual stocks , that’s a different game altogether and I am not equipped for that).
And mind you, I have not even touched upon the geopolitical fallout from China Country Risk and the Trump idiocy Risk!!

What do I think about doing NOW⁉️

Understand the impact of the Feb 2018 Finance Budget on my investment portfolio (not only LTCG but Dividends too) and how to prevent an adverse fall out.

I never forget Buffett’s Rules For Investing…
One thing I am convinced for certain that – Planning cash flows and taking asset allocation seriously has become all the more important.
Stay safe and invest in a way that allows you to sleep soundly.

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