Posting after a break and if we refer my last post of September 2018, the post was pretty much correct in terms of correction. We had a good 15 pc correction.
The correction was from 11760-10004.
In today's post, I would like to focus on the post election scenario and how things can play out.
A very key indicator is the P/E ratio for the markets. Anything above 25 is perceived as a bubble territory.
The current P/E is 29.13 and the index is at 11643. This also means that with every 400 points movement in Nifty the P/E increases by 1.
Let us look at this old chart I have posted.
https://money-manthan.blogspot.com/2009/08/2-of-most-important-and-basic-analytic.html
This means we are in bubble territory already.
Now, there can be 3 scenarios post elections:
1. A Clear BJP Majority in which case there will be euphoria and we can expect the markets to go up another 1000 points or so. A top can be expected around 12500.
2. NDA win with a weakened majority. In this case, a correction can be expected. We can expect 10000-10500.
3. Unlikely but possible,opposition lead coalition. This would initially lead to a sharp correction much like in 2004. This will take us back to 9000-9500.
What is the bottomline in all this? The earnings have to catch up with the Nifty. In the best case scenario also there is limited upside and it would be prudent to book profits if not before elections but definitely post elections.
The correction was from 11760-10004.
In today's post, I would like to focus on the post election scenario and how things can play out.
A very key indicator is the P/E ratio for the markets. Anything above 25 is perceived as a bubble territory.
The current P/E is 29.13 and the index is at 11643. This also means that with every 400 points movement in Nifty the P/E increases by 1.
Let us look at this old chart I have posted.
https://money-manthan.blogspot.com/2009/08/2-of-most-important-and-basic-analytic.html
This means we are in bubble territory already.
Now, there can be 3 scenarios post elections:
1. A Clear BJP Majority in which case there will be euphoria and we can expect the markets to go up another 1000 points or so. A top can be expected around 12500.
2. NDA win with a weakened majority. In this case, a correction can be expected. We can expect 10000-10500.
3. Unlikely but possible,opposition lead coalition. This would initially lead to a sharp correction much like in 2004. This will take us back to 9000-9500.
What is the bottomline in all this? The earnings have to catch up with the Nifty. In the best case scenario also there is limited upside and it would be prudent to book profits if not before elections but definitely post elections.
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