Where to invest in 2016?

If Nifty corrects to 7500  - 7600 levels that would be good time to start buying Nifty Bees (Goldman Sachs ETF for Nifty Index listed and traded just like any other stock) as a diversified portfolio of 50 great stocks in India. At 7500 the index would have roughly 7% earnings yield which will also be your fixed deposit yield 1 year forward. With gold & Real estate delivering negative return and thus out of Indian investors portfolio one will not have much choice but to invest in Indian equities. 

Low earnings base of current year, sharp reduction in interest rates, under utilization of factory capacities, govt. spending & reforms, and benign commodity prices will all work together in favor of Indian equities and thus provide floor. A good monsoon next year will add icing on the cake and Nifty could breach 9000 by next Diwali. 

The gloom doom and panic - Is everything all that bad?

With all the talk of FII money flowing back to US markets from India and analysts suggesting levels which are unnerving, there is complete panic out there and people might be thinking what to do now. So in this gloomy scenario, is that all bad or people are over reacting? Lets look at the following points:

1. The Quantitative easing by Fed was anyway expected to start rolling back by year end and people were well aware that this massive money printing cannot go on foreever. As a result there has not been any bubble like situation in equity asset classes around the world. Most of the equity market are reasonably valued and Indian markets are also trading below historical average valuation. Hence there will be valuation support on further fall in equity markets in India. 

Nifty support @ 5800

After the relentless rise in the month of April and May this year market is finally showing some correction, thanks to our domestic problems such as currency depreciation, reform slowdown and general election next year.

Nifty has corrected 5% in the last 20 days and is witnessing selling pressure at higher levels beyond 6100. Defty (dollar nifty) has corrected 8% in last 20 days due to massive correction in INR vs USD.

Though the upside seems fairly capped at 6100, the downside also seems to be capped at 5800. As on 7th June the Nifty closed at 5880. Below are the indicators which are suggesting limited downside for Nifty below 5800 in the current month. However in case INR blows out completely or some grave news comes out of Europe or US, the 5800 level could get broken and the market could slide down significantly as the major support would have got broken.

Sensex 2013 PE valuation near historical bottom

Historically India's benchmark Index, SENSEX, has bottomed out at a PE valuation of 10 to 12 times. At the current index level of around 16,500 and an estimated EPS of 1250 for the financial year 2013, the index is trading at a PE multiple of around 13 times FY 13 earnings. Above that considering the appreciation of dollar against rupee, the valuation in dollar terms is already around 11 times if we assume an average dollar rate of 48 against INR.

Nifty forms Head & Shoulder Pattern: Breakdown confirmed

# The Nifty index made a fresh 2 year low to close at 4651 levels on Friday, 16th Dec 2011.

# The breakdown happened on huge volumes and strong momentum on the downside.

# The head and shoulder pattern, as visible in the chart below, confirms the breakdown.

# The index is significantly below the short term (20 DMA) and long term (200 DMA) moving averages.

Is the global stock market rally sustainable?

The Stock Markets across the world have risen sharply since 4th Oct. In just five trading days the DJIA rallied 1,030 points (10%), the S&P 500 rallied 120 points (11%), and the NASDAQ rallied 268 points, or 11.66%.

So why is this rally at all?  

Samir Arora (Helios Capital) view on stock markets - October 2011

Samir Arora, fund manager at Helios Capital believes October is going to be a bad month for equities all across the board. "The European Financial Stability Facility (EFSF) expansion already factored into global equities," he added.

It has not been a good start to the month with Nifty seeing 1.5% cuts on the first two trading days. Arora feels the second quarter performance will weigh on Indian equities this month. "I think the result season, in general, will be bad," he said.

NIFTY 4950 support violated - Could test 4720

Indian stock markets saw panic selling today which brought both the indices SENSEX and NIFTY down by more than 4%. NIFTY today saw the biggest point fall since october 2008. The chance of Greece going default has increased substantially which is creating panic in the system.

NIFTY today breached its crucial support level of 4950 which could drag it to the previous immediate support of 4720. It is advisable to stay on the sidelines and let the panic settle before initiating fresh buy.

UBS / CLSA / MorganStanley cuts Sensex target for 2012

UBS has cut its year-end target for BSE Sensex by 2000 points to 19,000 from its earlier projection of 21,000. For NIFTY the March 2012 target is revised down to 5,900 from its earlier target of 6,500.

Terming FII outflow as one of the biggest concerns of the Indian stock market, UBS said: "In the absence of severe FII outflows, Indian markets should find support at current levels. However, if we see significant FII outflows, the Indian stock markets can correct further by 15-20%" 

FII outflow continue to put pressure on Indian Markets

Foreign institutional investors were again the net sellers of Rs 1,440.55 crore in Indian stock markets today, after selling stocks worth Rs. 758 crore on Wednesday (24th August). Benchmark index SENSEX ended 150 points down in todays trade.

So far this month the FIIs have sold stocks worth more than $2 billion in Indian markets.

Related Post:

Indian Markets Dances to the tune of FIIs.

Indian markets may rally to 5300 levels in next 2 months

Nifty Ladder

Largecaps or Midcaps?

The hot question buzzing in the market is what to choose in this turbulent time, Large Cap stocks or Mid Cap stocks?

Midcap stocks were already undervalued and the recent correction has made them even more undervalued, but large cap stocks which used to be on the expensive side some time back now looks reasonable. So investors are confused on where to go.

I am a great fan of mid caps as they hold the potential of becoming multibaggers. We cannot expect Reliance Industries, ONGC, TCS, Infosys to become multibaggers in next 2 years as they already have a market cap of above of 2 lakh crores and to become even 2 bagger they need to add another 2 lakh crores to their market cap which is difficult to happen in 2 years time frame. But midcap stocks having market cap of less than 2000 crores can become multibaggers if they are trading at lower valuation and valuation re rating happens in course of next 2 years.

Indian stock market outlook 2011 - InvestorZclub Analysis

The interest level of the investors in the market has come down significantly in the past 2 months because of indecisive market behaviour. No body seems to be making money in this kind of market and hence staying away from it. But its a very common question in every investor's mind, where will the SENSEX / NIFTY be in next 6 months.

InvestorZclub believe that the answer lies in few basic facts:

1. If economy does well i.e the country grows at a faster rate than average GDP growth of the country in past three years, markets usually perform better. But its a well known fact now that India will find it very difficult to grow above 8% if high levels of inflation & Interest rate persist. Hence the macro economic support would not help the markets in next 6 months.

Japan Crisis - What should investors do now?

Japan crisis seems to be bigger than what people anticipated a week back. Before the Middle east unrest could even stabilize, Japan event occured and had shaken the investors confidence twice in the last 2 months. One after the other global events have spooked the Investors confidence in equity assets across the world. At this point of time there are lot of uncertanities which might unfold over couple of weeks. Investors are confused on what they should do now. What should be the correct strategy to follow in this market situation.


There are few things that one should do at this point of time to avoid big losses and generate long term wealth. The focus undoubtedly should be more inclined towards protecting the capital instead of making huge punting gains.


1. Cut your levergaed position if you are long. Series of events and uncertanities will keep the bigger investors away from putting fresh money into equities in the next 1-2 months.


2. Hold on to quality blue chips even if there is quotational loss. Once the market recovers they will be the first to absorb inflows and hence rise.


3. Selectively buy quality midcaps available at cheap valuation. Use every dip to incremently put money into these themes and keep a horizon of 1 to 2 years.


4. Allocate some money to fixed income assets & utilize the advantage of high interest rates on Fixed deposits by banks and companies. Some companies are even offering an interest rate of more than 12% per annum for a 3 year deposit. Please ensure that the fixed income scheme of the company you invest in has a stable credit rating.


5. And last but not the least, don't panic and take decisions in haste. The world is not going to end. Every time the crisis hits the riskier asset classes are sold first but it rises euqally fast when things stabilizes.

Stick with the bottom up approach in 2011

Indian stock markets have corrected more than 5% in 2011 and individual stock have seen correction in the range of 10-15%. This market correction has made some of the stocks very attractive.

The rise of indian market in 2009 and 2010 is certainly a reason for SENSEX and NIFTY to take a breather in 2011 and hence a broad based call on stocks based on markets might not be a good idea. Instead one can look at the sectors or stocks which have not performed inline with the markets in 2009 and 2010. For example MIDCAP IT basket, Shipping were lagards of 2009 and 2010. If the globe is expected to do well in 2011 then good quality companies in both of the above sectors should do well.

Good quality stock in the MIDCAP IT segment are still trading at a PE range of 6-12 which is tremendously cheap given the cash generating and high ROC nature of the business. Some of the name like POLARIS Softwares, MPHASIS, ZENSAR Technologies, NIIT TECH are trading at rediculously low valuations in absoulte terms and should give decent returns from current levels in 6-12 Months. Names like GE Shipping under the shipping sector looks atttractive at the current valuation.

In a nutshell if one doesen't get panicked by the volatility in the market and focus on individual story one can still make decent return in this market. But the mantra is to keep the temparament cool and look at this market correction as opportunity.

Happy Investing!!.

Is the recent correction an Opportunity?

Yes this correction is certainly an opportunity to nibble some of the quality mid and large cap stocks which have fallen with the rest of the markets without any reason. After Satyam saga, the corporate governance has again come into limelight. Any company having any kind of governance issue whether big or small is being punished brutally by the market. Welspun Corp, Akruti city are some of the example which fell like 9 pins on Friday because of news of stock price manipulation in cordination with stock brokers. So one should stay far away from those names and should avoid any kind of bottom fishing. Any company having any kind of news regarding the governance should be completely discarded at this stage. They might rise a bit tomorow but its safer to not invest in tainted companies, as one never knows how greedy is the management and what else has happened in the company which is yet to come out in public. Satyam was a big lesson for every one.

But because of panic some really genuine companies have also corrected in the recent fall. One can look at some of the bluest of the blue chips like NTPC, Bharti, Axis bank etc and start acummulating slowly at each fall. They have got very professional & honest management and are available at reasonable valuation and are expected to perform well over medium to long term. One can also look at some of the quality mid cap companies having good professional management, governance & reasonable valuation like Federal Bank, Firstsource, Zensar Technologies, Godrej Properties etc. But one should avoid exhausting his entire budget for investing in one shot and only invest at correction in small lots.