- Wealth PMS (50L+)
Welcome to another episode of the Indian Stock Market free falls, where every day is getting worse than earlier. With today’s 6% slide down to 4500, we’re at the levels when the upmove really started, in August 07.
[Actually that’s when I started my trading portfolio and Jan end or so is when I finished it, with the portfolio up around 58%. I’ve sold nearly everything – readers will know that I’ve been bearish a long time now – and it looks like I was right, in hindsight.]
Now is this the bottom? Uhem. Nifty’s P/E is still 19.6, which you might agree is a tad high for the current state of the world. We should be valued at sub 15 levels, which is another 20% lower than here. That is value. Today we are still hoping for momentum.
Bear Sterns, one of the largest US investment banks, nearly went bust. Last Monday the company said, “Bear Stearns’ balance sheet, liquidity and capital remain strong.” On Thursday the stock was around $60 per share, and on Friday it tanked to $30. Today it was bought by JP Morgan for $2 per share.
$60 to $2 in TWO DAYS. What a nightmare. Will we see such a situation? I sure hope not.
Uhm. Orchid Chemicals is down some 38% today, ICICI Bank down 13.3%, and a lot others completely beaten up. It’s not a nice thing but let me say this: this is still a good enough level to get out. Not worth staying on, and there may be a rally after this to help but these are just levels to cash out. Shorting is tough at these levels, you need to look for a strong rally, preferably after this month’s expiry.
Coming to investing: We will soon come to levels where “value” becomes apparent. Please don’t rush in. There is a lot of latent bad news and we need to go through all of those, overreact, take it completely down until there seems to be no hope. And that is the time to invest.