Actionable insights on equities, fixed-income, macros and personal finance Start 14-Days Free Trial
Actionable investing insights Get Free Trial

So it's now 20,000, is it a big deal?

We’re now at 20,000 on the Sensex and nearly 6000 on the Nifty. Who’d have thunk this a couple years ago? Everyone is celebrating – The TV channels have gone berserk, as they would be expected to, and Mukesh Ambani is the richest man in the world.

First reaction: Goodness this is crazy, is this irrational exuberance? Second reaction: Big deal. This as always been exuberance, as I’ve been rattling on for the last two months. We may have a lot more to go, we may end up dead tomorrow, who knows? I’m on the “enjoy the ride” sequence.

90% of the last 1000 points were in just 6 stocks – L&T, ICICI Bank, Reliance being the real meat of the move. Yet, are we overvalued?

This is results season, and results are excellent. BHEL is up 91% on profits, HDFC up 75%, L&T up 73%, Suzlon up nearly 1000% and so on. I could go on for a bit but it seems like the fundamentals are mindblowing! This is fantastic stuff, Corporate India. These results tell me how much we can grow in real terms, and that eventually this kind of growth can help us build India. Note: This has nothing to do with stock markets – earnings growth may not be reflected in stock prices, and vice versa. In fact the past is testament to how markets have either overvalued or undervaled the economy. But strong sustained earnings growth makes to a good long term story, according to me.

Another interesting development is that FIIs were net buyers on Monday – they put in 680 cr. in NSE Cash and over 2000 cr. in derivatives. Plus, mutual funds have been buying for the last week or so, but small amounts – around 500-600 cr. per day. This is also quite good, and when domestic institution investment levels go crazy maybe there will be some cause for concern.

There is still a lot of caution in the markets, so I’m confident we’ll go up from here. It’s when we’re all euphoric is when it will come crashing down. I’m now not just invested but also leveraged and in – of course it’s money I can afford to lose so I’m ok losing a significant part of it too. Up over 45% now and going strong.

This now is going to get philosophical. My son’s taken to ghazals. He only sleeps when I play Jagjit Singh’s numbers, so I’ve been listening to a lot of them lately. So it struck a chord with me when I realised how some investors have completely missed this rally, calling the markets “overpriced” when it was 4500 Nifty/16,000 Sensex. How some stocks which were “hot” were labelled irrational and investors refused to buy them. How some commenters here were actually angry that their stocks had not even moved while the market scaled new highs. Sometimes, you miss things because you’re too focussed on “value”. In a Jagjit Singh number, quite aptly put:

Hoshwalon ko khabar kya, bekhudi kya cheez hai.

And when this all dies down – the crazy bull run, the madness to buy and sell, the insanity goes away, another number applies:

Tum chale jaaoge to sochenge,
Hum ne kya khoya, Hum ne kya paaya.

Right now, I’m just riding with the trend. Phir karenge hisaab, ae saaqii.

Disclosure: Long everything.

  • Anonymous says:

    >I think you logic and strategy seems OK.

    But one comment:
    No body can say at which point we will crash. At the end if you want to win you will have to put a target or play like Mr. Jesse Livemore the greatest trader ever born. His strategy was just keep on buying or holding till the trend is up and once he spots downturn he just got out. But in the end he had a tragic personal life and death.

    Good luck.

    Personally I think when the retail comes in – that is the point of inflection. You can join the Hedgies and get out.

  • Anonymous says:

    >Hi deepak, as usual an entertaining and informative post. I have just one comment: How does a retail guy like me play this market out. And yes I do want to play this market. Does it make sense to buy the index through an ETF, or would an index fund be better? Secondly, would love it if you could do a post explaining leverage in simple language and how one can leverage, without getting your hands and legs burnt. After all, if you’re looking at building a substantial porfolio then you do need to leverage, would like your thoughts on how this can be done by a retail investor like me. Look forward to your comments. Thanks

  • Anonymous says:

    >I know the basics of futures and options and the pricing of it. It would be helpful if you can explain me the brokerage structure and how to exercise an option. I know for closing out i have to sell a Put/Call option if I have bought a Put/Call Option respectively. This could be done before the exercising day. But how to exercise it on the exercising day.

    Which futures/options you would suggest for beginners like me?

    I have been in the market for the past 6 months. Most of the time watching the market. Didn’t participate much in this huge rally.

  • Gunjan says:

    >I am relatively new investor, post 10000 index! I am fan of few investor blogs, your style of writing I like the most.

    In recent past stock market has turned out to be a quick money making machine, if you are ready to take calculated risks.

    History being full of misuse of loopholes, scams etc, it would take time for people to really ‘trust’ the market and its systems. Once that trust would come, people would be most of the time hopeful rather than fearful about the market movements.

    It takes years to establish consistently stable and bright image for any organization, Indian sock market is no exception.

    Btw, I liked lines of ghazals, I could feel how you must be ‘living’ what you do in market! Interesting.

    “Dair-o-haram me jo chain milta, kyo jate maikhane log”

  • Siva says:

    >Deepak, Yes, If u can explain the leverage with example, it would be useful.

  • Siva says:

    >Now, I have been buying stocks in small numbers which are crossing the circuit filter. These stocks are read in Eco Times.
    One stock is UP 20% in 4 days.

  • Kunal Bhasin says:

    >Good One ..:-)