Few Words on Market…

by Vivek Karwa, CPFA., CFPCM

150120: #IndianStockMarket has delivered fabulous returns in 2014. For the period 1-1-2014 to 31-12-2014 the frontline index #Sensex had given a return of 29.89% though the return was good it stood third in the list of global indexes.

The #BSE100 delivered a return of 32.27% while the #BSE200 and #BSE500 delivered returns of 35.49% and 36.97% respectively. The US market of which we are generally obsessed of, #DowJones delivered just 8.49% for the same period. We in this newsletter have always been bullish past one year and the #Bankex delivered highest return of 65.05% among the sectoral indexes.

If you note from the above mentioned returns the highest returns have been from the small and mid cap while the frontline stocks along with Sensex and Nifty have given lowest returns. Lowest in comparison to other indices, in absolute terms 30% returns can be termed as fantastic.

In spite of all cylinders pumping, the markets do not seem to be costly yet. The small cap and the mid cap stocks were beaten so badly that they ran anywhere between 50 to even 200% in certain cases. Such stocks even after such run up are still trading anywhere between 30 to 60% lower to their highest levels registered.

Even the Sensex and Nifty valuations do not look very bad. We registered 21000 in Jan’08 and crossed the level in this year and are now trading at 28300 approx. after 5 years! The valuations of companies have changed during the period and market is still to focus on this factor and re-rate the pe.

We this time have a stable government, not even a year is over hence it would be too early to say that they would perform very well, but the initial signals suggest that they are serious on reforms and may do many things which will improve the eps of the frontline companies. We post the end of this financial year, will start factoring in the future earnings. So at the current P/E of Sensex and the Nifty we are definitely costly, we are just at fair values.

The new government has also been cheered with the crude oil prices slump. The government which used to fund the fuel consumers by way of subsidies are able to garner more revenues in form of taxes in spite of reducing the prices nearly 10 times since assuming office! This will aid in controlling the subsidy burden.

Interest rates also have been cut for the first time by RBI after many years. We feel this is the start of the downtrend in the rate cycle. Lower interest rates will have positive impact on every sector in the economy. Banking sector may continue doing well in the future since they will now be able to recover the loans which have already been termed as NPAs.

So 2015 should be volatile but positive year. We will find huge supports at 25500 – 25000 and 24700 – 24300 Sensex levels. We may try to achieve 33600 – 35000 in 2015. Remain Invested.

This Article will be Printed in the Investors Digest Magazine of TamilNadu Investors Association (SEBI Recognized)

Disclosure:- It is safe to assume that the author may have interest in the sectors recommended in this news letter. Seeking personal advice from your Financial Advisor is recommended before acting on any of the substance given herein. The numbers, figures, etc., presented may have been taken from various sources.

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