Is It Time to Worry about the Market? - Views on News from Equitymaster

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The Equitymaster Research Digest

Is It Time to Worry about the Market?
May 24, 2017

  • Taha's one line e-mail says the market is expensive. Reason enough to worry?
  • Madhu tells you why the market is unhappy with SBI.
  • Kunal says Bajaj Auto's worried about electric vehicles. What about Hero and TVS?
  • Should investors worry about Sintex Industries?

Taha Merchant, who's part of Equitymaster's research team, is an astute stock picker and a keen follower of Ben Graham.

I'm fortunate to have him on my Microcap Millionaires team. After all, the service is based on Graham's principles.

It's no surprise he keeps a hawk eye on the market. Valuations are important to any Graham disciple.

Once every month, Taha sends an email to the entire research team.

The email contains only a few words - 'Sensex PE at x times'.

'X' is the Sensex PE on that date.

That's it.

What's the purpose of this?

Well, we are in a bull market. And in every bull market, people tend to get carried away by easy profits.

This is completely natural. Easy money is intoxicating.

And dangerous.

Analysts start justifying high valuations based on future growth.

Growth that may or may not come to pass.

Taha's updates on the absolute market valuation help keep us grounded and humble.

We know the long-term PE of the Sensex is around 17 times.

Currently, it's 22.36. A premium of more than 30%.

Is this premium justified?

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