When I hear non-financial papers like Times of India post stories that sensex is at record high of 28000, it always feels as a good time to sell. Besides, these record high valuations are bad for investors in the sense that it is now too risky to invest. No one can say for sure how much more the markets will rise fulled by easy money from abroad through FIIs.
Economictimes as usual prints stories like "Sensex on track to 30000". As if Sensex is a train and next station is 30000 or reaching there will be an accomplishment like building a new bridge in Himalayas.
Personally I like it when I read record lows or market collapse type of news. Because that is when it is likely that you will find good stocks at decent valuations.
Meanwhile, India's growth is slowing. Service sector growth stalled in October. HSBC Composite Output Index — that maps the manufacturing as well as the services sector output — stood at 51, down from 51.8 in September, indicating that growth of private sector output in India eased to the weakest in five months.
Also, housing sector is slowing. Launch of new homes dips by 21% in top eight cities in July-September.
But the sentiments are high. Everybody thinks business will pick up soon, perhaps in early 2015. May be Mr Modi's govt will deliver some dazzling new reform in next budget.
These reforms, if they happen, will take time to implement and then even longer to show up as profit in company earnings. Will stocks keep rising until then? Probably not.
Stocks are just front running the future actions. They always do. But nobody knows future. When something surprising comes that doesn't look "bullish", valuations just fall to where you could actually buy.
I certainly agree to some points that you have discussed on this post. I appreciate that you have shared some reliable tips on this review.
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