Indian Share Market Maturing ? Take a hint from Mr. Rakesh Jhunjhunwala

In an interaction on August 23, the Warren Buffett of Indian stock markets Mr Rakesh Jhunjhunwala said, until now we have had three bear markets. “In April 1992, the peak PE was at 63.1 per cent and we have the scam of Mr Harshad Mehta, then in 1994 we peaked at 42 times the earnings, then in December 1999 we peaked at 30 times the earning and had the Ketan Parekh scam. In 2008, we peaked at 21 times the earnings with no scams. While there was euphoria and mania, this time we have peaked at a far more reasonable valuation and are still below peak PE levels of the past,” he said. If I can read between the lines - this to me signifies that as the Indian market matures even further, the gap between manic reactions on both sides - euphoria and pain will narrow. Though the same cannot be said in terms of a time lag between the two - which may well signify an overall lower CAGR on a basket of share market investments. Future upsides will be capped at lower PEs than the previous highest achieved at the last peak before it plateaus out. Therefore, investors who really want to make money in the longer run will have to enter stocks only when it commands a lower PE (considering that previous PE highs may not be achieved) with of course other future prospects and parameters. To coincide with Mr.Rakesh Jhunjhunwala's nuances, a recent SEBI amendments for a stricter evaluation and pricing of IPOs and other capital issuances by existing listed companies is not only a very positive step in managing expectations at reasonable levels of the both issuer and the investor - it will also help in the markets coming of age.

USA & India - Stock Market Co-relations

In the past 2 months the Dow Jones Industrial Index and India's NSE Index have seen positive patterns emerging in terms of technicals - both showing a rising top and a rising bottom formation. Going forward, both countries are grappling with oil price led inflation and their respective negative internal micros. The markets seems to have resigned itself to some issues that they have little control over and are possibly looking at better times ahead. However, excesses on the upper side have yet to be reciprocated on the down side as is the nature of the markets. This could well happen if commodity markets once again spike up or an unknown eventuality catches everybody unawares. With political elections around the corner every effort will be made to feed market-friendly news in the coming months which may keep the markets steadier despite intermittent blips. Possibly, the scenario will add to the time-wise correction with a positive bias which the markets indeed requires for longer term sustainability.

Mid-Cap IT Stocks look good

Mid cap stocks like 3i Infotech, Rolta, Geodesic and Microtech are some of the stocks that look very good bet in a gyrating market largely because of the neutral impact on these companies due to adverse conditions in the USA & other developed markets. The domains these companies operate in largely insulated to local micro and macro headwinds.