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Now is the golden opportunity in the equity market

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An easy to understand, small and simple presentation to show how good is the present stock market situation for the small and retail investors looking for good profits in near future.

An easy to understand, small and simple presentation to show how good is the present stock market situation for the small and retail investors looking for good profits in near future.

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    Now is the golden opportunity in the equity market Now is the golden opportunity in the equity market Presentation Transcript

    • +91 88 84 00 99 88www. Hornmerchant.comHornmerchant TM Making Money More Productive Now is the Golden Opportunity in the Equity Market Sensex is back to 11,000 points!!! i.e., Sensex @ 19,000 today = Sensex @ 11,000 in year 2009 And Nifty back to its level in the start of FY 2009-10! By Girish Kodashettar
    • +91 88 84 00 99 88www. Hornmerchant.comHornmerchant TM Making Money More Productive Today (16-Aug-2013), after a big fall, NSE / CNX Nifty is at 5,508 BSE Sensex is at 18,598 4% Forget about at these levels, even at higher levels (Say, Nifty 6,000 or Sensex 19,000), stocks are available at very cheap prices. Many a times people ask me: Aren’t Equity Markets at current levels are near to highest levels? Is there any potential for further growth? Obviously, what they are comparing it with is previous highest levels (Nifty 6,300 /Sensex 21,000) that were attained by these indices. The fact is that, since recovery from 2008-09 recession, though companies have posted profits year after year, they kept on growing but, for various reasons their stock prices have not moved up to reflect the companies’ worth.
    • +91 88 84 00 99 88www. Hornmerchant.comHornmerchant TM Making Money More Productive To understand this more clearly we did a simple study. We’ve noted the Important fundamental ratios (PB* & PE**) of the market / index (Nifty) at current level and then checked the historic values of the same index at the same values of the fundamental ratios. So, Let’s have a look at what we found. *PE : Price to Earnings Ratio = Current Price of a Share Earning Per Share (EPS) Description of PE ratio @ Investopedia.com Video about PE Ratio @ Investopedia.com In case of our study, the Current Market Price and EPS considered is of Index (Nifty) which is weighted average of all stocks in the index **PB: Price to Book Value Ratio = Current Price of a Share Book Value of a share (BV) In case of our study, the Current Market Price and BV considered is of Index (Nifty) which is weighted average of all stocks in the index Description of PB ratio @ Investopedia.com Video about PE Ratio @ Investopedia.com Smaller the PE no. better is the investment opportunity Smaller the PB no. better is the investment opportunity
    • +91 88 84 00 99 88www. Hornmerchant.comHornmerchant TM Making Money More Productive Source: http://www.nseindia.com PE, PB & DY of Nifty for a period from 06-Apr-2009 to 05-May-2009 PE, PB & DY of Nifty for a period from 17-Jul-2013 to 16-Aug-2013
    • +91 88 84 00 99 88www. Hornmerchant.comHornmerchant TM Making Money More Productive So, as it can be seen, the PE and PB of 12-Aug-2013 very closely match to the values of PE and PB on 29-Apr-2009. Now, let’s see where were markets (Indices) on these dates.
    • +91 88 84 00 99 88www. Hornmerchant.comHornmerchant TM Making Money More Productive Source: www.moneycontrol.com On 29-Apr-2009, Nifty Closed at 3,474 points On 12-Aug-2013, Nifty Closed at 5,612 points Now PE @ 16.5Then, PE @ 16.5 NSE / CNX Nifty
    • +91 88 84 00 99 88www. Hornmerchant.comHornmerchant TM Making Money More Productive Source: www.moneycontrol.com On 29-Apr-2009, Sensex Closed at 11,403 points On 12-Aug-2013, Sensex Closed at 18,796 points Now PE @ 16.5Then, PE @ 16.5 BSE / S&P Sensex
    • +91 88 84 00 99 88www. Hornmerchant.comHornmerchant TM Making Money More Productive Now, don’t get confused or misunderstand this info by misinterpreting it so that for the given (today’s) PE and PB, the correct Nifty index level should be 3,474 and Sensex index level should be 11,400! That will be a blunder! The right way to look at is this: Last time when PE and PB were equivalent of today’s, then Nifty was at 3,474 and Sensex was at 11,400. From there both indices have risen to today’s levels (5,612 and 18,946 respectively). But even today, at these higher levels, indices correspond to the same PE and PB. That means, stock prices and hence the indices have increased their value to the extent PE and PB are maintained at the same lower levels. So it implies that, market (and large number of good quality stocks) is undervalued, the way it was during and just after the recession period. Now, Let’s do the same study for prior recession period when markets / indices were at the same levels in terms of points (beginning of bull run) and check what were Fundamental ratios at those levels.
    • +91 88 84 00 99 88www. Hornmerchant.comHornmerchant TM Making Money More Productive PE @ 16.5, PB @ 2.78 NSE / CNX Nifty Then, Nifty @ 3,430 Now Nifty @ 5,600 On 12-Aug-2013, Nifty Closed at 5,612 points Refer Next Slide On 30-Aug-2013, Nifty Closed at 3,430 points Refer Next Slide PE @ 19.25, PB @ 4.58
    • +91 88 84 00 99 88www. Hornmerchant.comHornmerchant TM Making Money More Productive PE, PB & DY of Nifty for a period from 17-Jul-2013 to 16-Aug-2013 PE, PB & DY of Nifty for a period from 01-Aug-2006 to 31-Aug-2006
    • +91 88 84 00 99 88www. Hornmerchant.comHornmerchant TM Making Money More Productive BSE / S&P Sensex On 23-Aug-2006, Sensex Closed at 11,406 points Then, Sensex @ 11,400 On 12-Aug-2013, Sensex Closed at 18,796 points Now Sensex @ 18,800 PE @ 16.5, PB @ 2.78PE @ 19.25, PB @ 4.58 Considered for Nifty; it will almost same for Sensex as wellConsidered for Nifty; it will almost same for Sensex as well
    • +91 88 84 00 99 88www. Hornmerchant.comHornmerchant TM Making Money More Productive That’s the evidence that, today market valuations are more attractive than when Nifty was @ 3,400+ or Sensex @ 11,400+ seven years ago. From those levels stock markets rallied to grow by 80%! So, now you can guess (estimate) what is the potential of Stock market for further growth. Are you easily seeing Sensex @ 30,000 points or Nifty @ 8,500 points in the days to come?! So, what you should be doing now?
    • +91 88 84 00 99 88www. Hornmerchant.comHornmerchant TM Making Money More Productive According to me it depends on what who you follow (admire): Herdy Mr. Herdy He has big fan club and big no. of followers on Facebook and Twitter. He advocates that all his followers should stay away from the stock market now and should wait until the markets have really gone up and when there is lot of ‘action’ happening! Mr. Buffetty He advocates fortunes are made during the times like these. He suggests his followers to invest for long term in equity and especially when stocks / markets are undervalued. Our Suggestion: If you belong to this group, simply do what Mr. Herdy tells you Our Suggestion: If you belong to this group, refer the next slide
    • +91 88 84 00 99 88www. Hornmerchant.comHornmerchant TM Making Money More Productive 1. Though markets at these levels are too attractive, they still remain Volatile. 2. If you are looking for making good returns on investment in next 2-4 years, you should be investing now. 3. If you are not a domain expert in the investments and if you are not a High Net worth Individual, please take Mutual Fund Route for your equity investments. Professional fund mangers are better qualified and equipped to fully exploit the available opportunities and handle volatility in a better way. 4. Seek help from Investment Advisors
    • +91 88 84 00 99 88www. Hornmerchant.comHornmerchant TM Making Money More Productive HornmerchantMaking Money More Productive www.hornmerchant.com