Are we on Everest or still at base camp?

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After a very long gap I am back to my Blog. Will try to be regular, consistent and more qualitative. The Indian markets are now at all time high. Will they sustain these levels? Will they create new highs? Many analysts are claiming for a target of 7000-7600. Is it a possible target or just another bubble? Lets examine.

We need to understand the NIFTY in 4 different contexts.

1. It's present VALUATION.
2. Economic indicators
3. Political Scenarios.
4. Liquidity

1. Nifty When touched it's peak of 6357 in 2008 Nifty has a P/E ration of 27.89 Where as in 2014 when nifty reached a peak of 6591.5, the P/E is still at around 18.54. That means Nifty is undervalued in terms of PE. Even at a conservative estimation of 21.12 PE that we saw in 2011 July we can expect the market at 7508.

2. Economic indicators are recovering slowly from the worst bottom they saw in recent times. MOSP forecasts GDP growth of 4.82. GDP is not fully positive. Interest rates are still at high. Inflation came down from 11.12 in October to 8.1 this January. Overall scenario looks positive.

3. Political scenario is fast changing in India. Hopes are rising on a stable govt led by pro-market Narendra Modi. But still the ground reality may be different from what we are seeing through the eyes of media. In my opinion Our media hardly understands the actual voting population of India.

4. Indian Markets are getting good numbers in FII investment. But the problem is with retail participation. The 2008 Market crash has frightened investors so badly that many small investors are away from market now. Most of them may never return to market again. That is possible only when markets grow steadily with stable and long term investments from institutional players.

Indian markets fundamentally has a potential to reach 7500 in medium term and 9000 in long term. If there is a stable govt in center and economy grows with little more pace. we need to create 10 lakh jobs per year to keep the unemployment under control. Which will stabilize the growth rate automatically and will help us to climb from base camp.

Investors please wait till the election results.
Traders please trade with proper hedge till elections.

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