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Sensex 40,000 is Almost Here! How Do You Beat the Competition in the Market? - Private Briefing

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Sensex 40,000 is Almost Here! How Do You Beat the Competition in the Market?
Aug 31, 2018

Dear reader, I've never lost an opportunity talk about Sensex 40k. Not because there's anything magical about that level. But only for the one reason - our very own Rahul Shah was the man who predicted it...way back in March 2016!

And we're nearly there.

So today I thought I'd let someone else give you their opinion on Sensex 40,000. Here's the one and only Ankit Shah, Editor of Equitymaster Insider, witting to his Insider list.

By the way, if you're not one of Ankit's 'Insiders', you're missing out on all his cherry-picked recommendations. Just sign up right away here.

Over to you Ankit...

  • Who could have predicted that the Sensex would be making new highs after faltering in February 2018?

    Back in May 2018, there were worries of rising crude oil prices.

    The Indian rupee has been correcting continuously...making new lows against the US dollar. Currently, the USD-INR exchange rate is Rs 70.25 per US dollar.

    The rot in the Indian banking system, especially public sector banks, isn't going away too soon.

    The small cap stocks witnessed a major sell-off following reclassification of mutual funds and additional surveillance measures by the market regulator.

    But the Sensex kept rising from one high to the next.

    For anyone who tries to predict the near to medium term direction of the Sensex, the stock markets offer a very humbling experience.

    When you expect a correction, the markets keep going strong. And just when you are certain the markets could only go one way - higher, the markets shock you with a correction.

    I understand it is our innate tendency to seek certainty...to have a firm ground beneath our feet...to know for sure where the markets are going.

    And the markets always leave us hanging on a dangling branch, with absolutely no clarity about what's going to happen next.

    So, don't wait for that day when you will know 100% how the markets are going to behave. The key to winning the game of investing is to embrace the uncertainty and volatility, and to keep playing the long-term game with patience, diligence and discipline. It may sound simple and boring. But well, that's the hardest thing to do.

    It took me a long, long time to internalise this insight.

    So, we will try not to predict the direction of the markets. However, we will keep looking at the key factors that are driving the markets.

    One of the key factors responsible for the buoyancy of the Indian markets is the flood of domestic liquidity into equities.

    The stock markets are getting insanely crowded. There's a crazy rush of Indian investors to grab a pie of the boom in the Indian stock markets.

    Look at this chart...
    The Great Indian Retail Investor Rush
    The Great Indian Retail Investor Rush

    It shows the quarterly growth trend in equity oriented assets under management of retail Indian investors since the quarter ended 2009.

    Here are some interesting insights in the above chart:

    • From the quarter ended September 2009 and to the quarter ended September 2013, equity oriented AUMs of retail investors were in a downtrend. They bottomed in the quarter ended September 2013 at Rs 1,087.9 billion.
    • After the quarter ended September 2013, equity oriented AUMs of retail investors have risen at phenomenal compounded rate of 31.5%. During the same period, the BSE Sensex and the BSE 500 indices have compounded at 14.9% and 17.7%, respectively.
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