Thursday, April 29, 2010

Ignorance is not bliss

Two days ago on CNBC, my fellow guest was saying: the world is very upbeat on India, investors are willing to pay higher valuations for stocks, therefore a higher valuation will soon become "the new Normal".

We hear a lot of buy side advice from investment bankers in all kinds of forums. I rarely hear an expert talk about a more reasonable valuation. The Nifty is trading at 23 PE. Now, who decided that this is reasonable? Historical values are much lower. Given the revulsion towards investment bankers, it is possible that their high flying values may also become unacceptable.

Our friends, cleverly link the growth in the Indian economy with higher valuations. They give the impression that people must accept higher and higher valuations since the economy is on fine footing. Sure. The economy is on fine footing thanks to the hard work of 120 crore people. I often think that the economy is in good shape inspite of the financial terror that the financial professionals unleash!

So, we are all hearing the buy-side advice. But we should understand the other side of the argument. Ignorance is not bliss.

5 comments:

Jagdish said...

Once again, they are missing the trees for the words. Why focus on anything else other than the price. Price action filters all information - who are we to decide valuations. e.g. If Oil goes above $100, these very analysts will shout from the rooftops that India's situation is grave. Best to listen to only the charts.

Shazia said...

WOW!
Rightly said.. Great insight..
Thanks
Shazia

San said...

Dear Sir,

I have started a blog for sharing my pattern analysis. Today i have seen a pennant formation in weekly chart. can you please confirm if i have done it correctly or not. I am posting the link here. expecting a reply from you

thank you sir

link:

http://niftychartsandpatterns.blogspot.com/2010/04/nifty-week-has-pennant-pattern.html

vnta said...

i had found an inverse H&S in india bull finance services head at 98 s at 130 and 138 on 30/04/2010 it broke out from it thogh i had bought it at 102 thenat 118 wen it broke above 118 second time and then again on 29/04/2010 at 139.45 anticipating a break out from inverse H&S (high volumes on 29/04 supported my buy) and on friday it went to 161 but closing candle has a bigupper shadow and this shadow is bothering me. so can u pls comment on it and if it indeed is an inverse H&S ? THOUGH I M IN PROFIT BUT doubts have appeared due to long upper shadow momentum oscillators are not overbought but then .....u never know....
anxiously waiting for ur advise/opinion

ravi said...

Sir,

VEry well said ! This will help many small investors