Over the past few months I have received many requests for portfolio rebalancing. Since August, I have been of the view that this is not the best time to deploy fresh capital in the market.
Those already invested should try to rebalance their portfolios and so I have done in many client folios.
Common question: with NIFTY having fallen ~ 10% from its highs made earlier this year, is it time to start buying stocks? Here’s how valuations will look at different levels on the Nifty with current EPS base.
At what NIFTY level will you start investing?
To calculate current EPS, I will be taking current Nifty P/E (15 November, 2016) which is 21.00.
P/E = Price (Nifty level)
Earnings per Share (EPS)
Current EPS = 379
 Nifty at 7,000 levels
P/E = 7,000/379
 Nifty at 7,500 levels
P/E = 7,500/379
 Nifty at 8,000 levels
P/E = 8,000/379
 Nifty at 8,500 levels
P/E = 8,500/379
 Nifty at 9,000 levels
P/E = 9,000/379
CURRENT NIFTY PE AS OF 15 NOVEMBER 2016 = 21.37
Typically, in a bull market (which I believe we certainly are in right now); valuations tend to run ahead of the earnings. It would be difficult to buy these markets at valuations of sub 19 level anytime soon. Further, some of the buying and selling that happened over the past 2-3 days has no explanation.
There sure is some amount of panic and herd selling. This could go on for some time as investors sell their liquid investments to arrange cash in the short term. Certainly with this new reality (of demonetization) one thing every investor should do is to pay some attention to his portfolio and rebalance it in light of the new realities.
As for buying stocks, sure . . . . . the tide could turn anytime from these levels.
The original post is written by Rajat Sharma of Mastermind, Sana Securities and is available here.
The S&P BSE Sensex settled 77 points down at 26,105 and the Nifty50 eased 6 points to close at 8,074. In the broader market, BSE Midcap rose 0.61% while Small cap closed 0.25% higher.
Even though the indices were largely range-bound during the day, Sensex rose 120 points as well as fell more than 100 points during the day. Nifty50 also breached its crucial 8,050 level during the day.
Weaker rupee boosted export-oriented sectors like pharma even when the overall market sentiment was not very positive.
For a week now demonetization of high value notes has been polarizing the country between those who totally support the idea and those who are against it. The move has had a big impact on the stocks markets. A lot of investors are withdrawing capital from stocks. Some because they are out of funds (since the currency they had at home no longer works) and others because they expect a crash, perhaps an opportunity to buy at lower levels.
Benchmark indices slumped by almost 3% tracking weak global cues after US bond yields soared on expectations US President-elect Donald Trump’s policies would stoke inflation. Further, demonetisation move by the government dampened investor sentiment especially with fast moving consumer goods and consumer discretionary sectors to have an impact in the short term. In an effort to curb black money and counterfeiting the government in a surprising move announced the demonetisation of Rs 500 and 1,000 currency notes with effect from midnight Tuesday.
The government’s currency swap plan to withdraw Rs 500 and Rs 1,000 bank notes from circulation as a way to demonetise is being hailed by many banks and experts as the ultimate weapon against black money. However, demonetisation, as a strategy, isn’t new and has been tried before with limited success.
Here’s what former Reserve Bank of India governor Raghuram Rajan once said during a lecture on the topic of demonetisation and if it worked.
Rajan: I am not quite sure if what you meant is demonetise the old notes and introduce new notes instead. In the past demonetisation has been thought off as a way of getting black money out of circulation. Because people then have to come and say “how do I have this ten crores in cash sitting in my safe” and they have to explain where they got the money from. It is often cited as a solution. Unfortunately, my sense is the clever find ways around it.
They find ways to divide up their hoard in to many smaller pieces. You do find that people who haven’t thought of a way to convert black to white, throw it into the Hundi in some temples. I think there are ways around demonetization. It is not that easy to flush out the black money. Of course, a fair amount may be in the form of gold, therefore even harder to catch. I would focus more on the incentives to generate and retain black money. A lot of the incentives are on taxes.
My sense is the current tax rate in this country is for the most part reasonable. We have a reasonable tax regime, for example, the maximum tax rate on high-incomes is 33%, in the US it is already 39% plus State taxes, etc., it takes it to near 50. We are actually lower than many industrial countries. Given that, there is no reason why everybody who should pay taxes is not paying taxes. I would focus more on tracking data and better tax administration to get at where money is not being declared. I think it is very hard in this modern economy to hide your money that easily.
The original article appeared in The Huffington Post and is available here.
In a 2000 article published in Money, Jason Jweig profiled a remarkable investor and friend of Warren Buffett named Joseph Rosenfeld who oversaw the investment committee for Grinnel College, a small school in Iowa.
“Joe,” says Buffett, “is a triumph of rationality over convention.” By ignoring the conventional wisdom about investing, Rosenfield has made money grow faster and longer than almost anyone else alive. Since 1968, he’s turned $11 million into more than $1 billion. He has heaped up those gains not with hundreds of rapid-fire trades but by buying and holding–often for decades. In 30 years, he’s made fewer than a half-dozen major investments and has sold even more rarely. [emphasis added] “If you like a stock,” says Rosenfield, “you’ve got to be prepared to hold it and do nothing.”
Here are the lessons from Joe Rosenfeld as summarized by Jason Jweig.
Do a few things well. Rosenfield built a billion-dollar portfolio not by putting a little bit of money into everything that looked good but by putting lots of money into a few things that looked great. Likewise, if you find a few investments you understand truly well, buy them by the bucketful. However, I think Rosenfield is a rare exception. Without his kind superior knowledge, skill and connections, most of us mere mortals need to diversify broadly across cash, bonds, and U.S. and foreign stocks.
Sit still. If you find investments that you clearly understand, hold on. Since it was their long-term potential that made you buy them in the first place, you should never let a short-term disappointment spook you into selling. Patience–measured not just in years but in decades–is an investor’s single most powerful weapon. Witness Rosenfield’s fortitude: In 1990, right after he bought Freddie Mac, the stock dropped 27%-. Rosenfield never panicked. Instead, he just waited. “Joe invests without emotion,” says Buffett, “and with analysis.
Invest for a reason. Rosenfield is a living reminder that wealth is a means to an end, not an end in itself. His only child died in 1962, and his wife died in 1977. He has given much of his life and all of his fortune to Grinnell College. “I just wanted to do some good with the money,” he says. That’s a lesson for all of us. Instead of blindly striving to make our money grow–or measuring our worth by our possessions–each of us should pause and ask: What good is my money if I never do some good with it? Is there a way to make my wealth live on and do honor to my name?
The original article is authored by Greg Speicher and appears on the blog here.
The decision by consulting major Capgemini to replace nearly 40% of its work done by its resource management group with IBM’s cognitive computing system, Watson, is a clear indication that it is not just repetitive or mechanical jobs that are at risk. Artificial intelligence (AI) is capable of taking on those tasks that require analytical skills. The tasks from education and skill development just got tougher.
By 2025, 70% of India’s population is projected to be of working age. A chunk of India’s present knowledge economy would have been chomped down by AI. As the knowledge economy evolves, India’s ability to continue playing a big role in that depends on swiftly raising the quality of education.
Benchmark indices ended lower for fifth straight trading sessions dragged down by selling pressure in pharma shares while weak global cues also dampened investor sentiment. Further, consistent selling by foreign portfolio investors along with growing uncertainty over Hillary Clinton’s victory in the US Presidential election also weighed on market sentiment.
The S&P BSE Sensex ended down 156 points to settle at 27,274 and the Nifty50 settled 51 points lower at 8,434. Sensex touched its lowest level since July 8, 2016 in intra-day trade whereas the Nifty dropped to its lowest level since July 11, 2016.
The broader markets underperformed the benchmark indices significantly- BSE Midcap and Smallcap indices fell between 1%-2.5%. Market breadth on the BSE ended lower with 200 declines and 500 advances.
This article appears on valuewalk.com and can be found here.
Who Is Benjamin Graham?
History has designated Benjamin Graham as the Father of Value Investing. He not only developed the concept but also lived it, both as a practitioner with a remarkable track record and as a professor who profoundly impacted his students.
Among his many accolades, Father of Value Investing is Benjamin Graham’s greatest title. Some of his other designations are Dean of Wall Street and Dean of Security Analysis.
Father of Value Investing
His research paved the way for today’s stock market analysts by introducing the concept of fundamental analysis and raising awareness of the correlation between stock prices and a company’s intrinsic value.