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Is the Bull Run in Indian Markets Fundamentally Driven?
Fri, 9 Jun Pre-Open

Share markets in India are on a roll with the benchmark indices currently hovering near all-time highs. And investors seem wildly optimistic regarding the future projections.

From a valuation perspective too, Indian stock markets are no longer cheap. In fact, they're trading at more expensive valuations compared to most of the global indices.

This we say as the one-year forward price to earnings (PE) ratio of Nifty is 22.4 times.

All of this makes us ask: Is the present rally backed by fundamentals?

The answer, sadly, is 'No'. While valuation has reached dizzy heights, earnings are yet to catch up.

Most of the rally we see today is based on the expectations of policy reforms catching pace and an improvement in macro-economic factors. And this is getting priced in stocks.

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So, while investors wait for the promised slew of reforms and return of confidence to boost corporate performance, should we keep buying Indian equities, taking the turnaround for granted?

In such interesting times, it is imperative for investors to revisit some of the investment fundamentals; the important one being striking the right balance between greed and fear while investing.

Richa Agarwal, Managing Editor at Hidden Treasure is very cautious about the same. She believes, in times like this, one need to be extremely disciplined about the businesses they are buying. Compromising on the quality of the business could prove fatal in these times.

As Charlie Munger has aptly said, "All intelligent investing is value investing - acquiring more than you are paying for. You must value the business in order to value the stock."

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Feb 22, 2018 (Close)