It is never a good idea to predict market movements. Especially so as an adviser. Because the first rule of investment advising asks one to forget looking at market movements and stick to asset allocation over the long term. But when the market conditions get stretched to dizzying heights, one cannot help but wonder - What is really going on here!
A quick recap - About 8 months ago, when Nifty reached the levels of 9500, we sent out a blog post to all our users to be wary of any lumpsum investments, especially in the small and mid-cap segment. We didn't have much of a fundamental rationale for the same, but it was an opinion more from a valuation perspective, especially the PE ratio. You can read the entire post at -
Fast forward today and we have been proven wrong. And how! The broader market Index is close to 11,100, nearly a 17% return in just under 9...
Late last week, something important happened. A lot of the discussion so far between the fund houses and regulators have been around capping of commissions, splitting transaction and advisory roles etc. A whole lot of efforts taken up by SEBI have been to solve conflicts of interest and making investment fees reasonable. Simultaneously, fund houses (along with intermediaries) have been putting forth a case for protecting their distribution channels and protecting their margins, a fairly genuine concern for them. But the directive that SEBI came out with last week, finally, is on the structural reforms for changing the way mutual funds are launched and managed.
The Problem: Fund houses have long adopted the strategy of launch and grow, furiously launching mutual fund schemes with NFOs starting with a NAV of 10 and pitching the retail client to get in early at cheaper NAVs. We've already explained why this strategy, while great for marketing, is just...
The stock markets are at an all-time high. Why? The market pundits will attribute it to expectations of a good monsoon, favourable political shifts, GST implementation, and so on. The truth is - this rationalisation always comes as an afterthought depending on whether the markets are high or low.
If we were at an all time low instead, the media would be talking about a possible border dispute, relatively delayed and complex GST, low corporate earnings and the possibility of Donald Trump starting a World War III.
It's always too difficult to follow these changing dynamics and make sense of them. But there is one undeniable fact that cannot be refuted - Earnings.
Price to Earnings (PE) Ratio - A simple way to understand how costly or cheap stocks are.
We know how fixed deposits work right? You give the bank 100 rupees, you get back 4 rupees every year. Basically, that translates to a yield of 4%. Higher the yield, the better. Simple.
While stocks are relatively...