X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Stockmarkets: Where to from here? - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Sep 15, 2009

    Stockmarkets: Where to from here?

    Now that is the type of odds any investor would take any day. As per a leading daily, a random portfolio of stocks created during the lows of March would have resulted in every second stock doubling over the next six months or so. In other words, even if the other half of the portfolio did not move at all, it would have still meant an annual return of 100%.

    However, investors who are feeling disappointed on missing out on the rally and want to atone for the same by investing at current levels, better watch out. A lot of experts feel that the rally may have outlived itself, at least in the short run and hence, expecting similar returns to the ones achieved in the past few months could be nothing short of an exaggeration.

    In fact, an analysis conducted by our team a few days back based on dividend yield of the benchmark Nifty and the expected future three year returns had also revealed that returns over a medium term period from here on could at best be 10%-12% based on historical data.

    Of course, the returns can be higher provided earnings of India Inc. grow at a faster rate than what was witnessed in the past. However, with the Indian economy expected to grow in the region of 6.5%-7%, any such possibility looks remote indeed.

    The second factor that might take markets higher than what fundamentals warrant could be the excess liquidity in the global markets. But as it has been proved umpteen number of times in the past, reliance on these inflows without an eye on fundamentals is not without its share of risk. A substantial chunk of such inflows tend to have very short term goals and hence, little signs of trouble and they could disappear just as quickly as they came in, leaving investors in the lurch. Thus, either waiting for the markets to undergo some meaningful correction or not expecting outsized returns would indeed be among the best strategies to have.

    Now, a model to predict human behaviour
    Are you under the impression that financial markets always get asset prices right? At least that is what the Wall Street analysts armed with their models and spreadsheets thought so. What they instead witnessed is the biggest financial crisis in the world since the Great Depression. So where did these 'financial engineers' go wrong?

    As per The New York Times, the crux of the failure was the mathematical models of risk that suggested that all those complex financial instruments were safe. While these models took into account the expected returns and the default risks of the instruments, what they failed to capture was human behavior and its potential for widespread panic.

    As a result, a new focus of research has emerged which is trying to model the mechanics of panic and the patterns of human behavior. We are not sure how that will eventually pan out. More importantly, will it be fool proof? Will these models turn out to be entirely right given how difficult it is too predict human behavior? We remain skeptical as of now.

     

     

    Equitymaster requests your view! Post a comment on "Stockmarkets: Where to from here?". Click here!

    1 Responses to "Stockmarkets: Where to from here?"

    c v pasupathy

    Sep 16, 2009

    Market will achieve NIFTY 5000+ TODAY but will be bearish in the close even 100- can be expected from the opening. So please keep close watch on holdings and book profit and keep cash to reenter latter. Good Luck. BUY LOW SELL HIGH BOOK PROFIT

    Like 
      
    Equitymaster requests your view! Post a comment on "Stockmarkets: Where to from here?". Click here!
     

    More Views on News

    How to Ride Alongside India's Best Fund Managers (The 5 Minute Wrapup)

    Jun 10, 2017

    Forty Indian investing gurus, as worthy of imitation as the legendary Peter Lynch, can help you get rich in the stock market.

    Why NOW Is the WORST Time for Index Investing (The 5 Minute Wrapup)

    Aug 18, 2017

    Buying the index now will hardly help make money in stocks even in ten years.

    Trump Takes a Beating (Vivek Kaul's Diary)

    Aug 18, 2017

    Donald J Trump, a wrasslin' fan, took a 'Holy Sh*t!' blow on Tuesday.

    How To Read Your Mutual Fund Account Statement Correctly (Outside View)

    Aug 17, 2017

    PersonalFN simplifies the mutual fund account statement for you.

    This Small Cap Can Drive Chinese Players Out of India (and Make a Fortune in the Process) (The 5 Minute Wrapup)

    Aug 17, 2017

    A small-cap Indian company with high-return potential and blue-chip-like stability is set to supplant the Chinese players in this niche segment.

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    More
    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407
     

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms

    S&P BSE SENSEX


    Aug 18, 2017 03:11 PM

    MARKET STATS