Market Update

Markets go up the stairs and down the elevator – Warren Buffett

The markets are in a correction mode these days and the cut in stock prices has been sharp when compared to 15% cut in the Sensex from 20,500 at the start of year to 17500 today.

Reasons for the decline:

  • The valuations were rich. PE ratio for Nifty as on 1st Jan, 2011 was 24.50 and has now corrected to 20. At 17-18 times PE multiples, the markets will become very attractive.
  • Unearthing of scams – shakeup in investor confidence
  • Rising Interest rates
  • High Inflation
    What has changed?
    Nothing too much in terms of longer term picture. We believe that India is an excellent long term growth story and the investors will do well by investing in growing corporates.
    In the short/medium term, if one analyses the Q3 numbers, many companies have seen lower margins due to inflationary pressures. The margins may remain under pressure for sometime but over a longer period, good companies should be able to pass on costs.

Interest rates have a inverse relationship with the valuations of markets hence investors should seek more margin of safety while investing.

What to do?

Market fall is always faster. Like Warren Buffett says – ” Markets go up the stairs and down the elevator”. So stay calm and take WB’s other advice – “Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it”.

As most of the stocks are in correction mode and in many stocks fall is of more or less equal magnitude, investors have an opportunity to sell their weaker stocks to better ideas. Portfolio re-shuffling is a must in these times.

Plan your future strategy and make a plan to invest money at fresh intervals on every fall (something like an SIP).

We have updated the “performance and review sheet” recently.

Happy Investing.

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  • Vikas Karunakaran

    Hi Ayush and Pratyush,

    You guys are true genius……very few who consistently practice value investing.
    A true followers of Ben Graham.Hats of to the service you guys do.
    Keep up the good work.Thanks Guys.

    Regards,
    Vikas Karunakaran

    • Ayush

      Hi Vikas,

      Thanks for the king words. We are just learners and keep sharing our work.

      Look forward to contribution.

      Thanks & Regards,

    • Simran

      Thanks for sharing these info with us! his is a great site. I really like it. Thank you for the site. May God bless you in all your works.SIMRAN

  • Shravanrayhaanpaul

    hey aush,
    i know its kinda silly to ask about this, but with my interest in stocks getting deeper my tendencies to get overwhelmed by reams after reams of financial data is also increase
    SO CAN U PLEASE SHARE UR THOUGHTS ON HOW TO READ AN ANNUAL REPORT?
    p.s. hows the thesis on empire industries?

  • Spdixit

    Hi Ayush and Pratyush ,

    Sorry to raise question here but my question is regarding performance sheet.
    http://dalal-street.in/performance/

    As their is no way to post comment on performance page so posting here.

    I need to know the difference between :
    “Accumulate”, “Buy” and “Buy on declines”

    Accumulate: should we start increasing the position (already held) at the CMP ?
    Buy: is this to create new positions ?
    Buy on declines : Should we wait for some more time ?

    Can you pls clarify on my understanding ?
    Thanks, Sachin

    • Ayush

      Hi Sachin,

      We rate a stock as “Accumulate” if it seems very attractive at CMP.

      We rate a stock as “Buy” if it is in the buy range.

      We rate a stock as “Buy on declines” if the stock is near the range but it would be better to buy slowly and on falls only.

      Regards,

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