On October 23rd 2013, the NIFTY PE Ratio clocks at 18.
NIFTY PE Ratio is the Stock Market Barometer for Fundamental Investor.
Stock Market runs in cycles. Whenever NIFTY PE Ratio crosses 25, there is a Crash on the schedule; 2008 January was such a stage. Similarly, whenever the NIFTY PE Ratio goes below 13, there is a U-Turn possibility & Fundamentally Good stocks will be Cheaper to buy then. The cycle repeats itself every 8.4 years.
A wise investor has to position for a LONG TERM VISION to take advantage of the cycles.
Stock Market reacts faster than Economy
Stock Market reacts 6 months before Economy. If the real economy is going to be better after 6 months, the market will show the growth today. On the reverse side, if the economy is going to be down ahead, market will do the discount today itself.
Base on the NIFTY PE Ratio, we can see there is a steam for 50% growth ahead.
NIFTY can go above 7000
SENSEX can go above 23000
If RBI holds the Rupee tight, then above levels are possible.
Current Stock Strategy would be:
- Do not buy Blue Chips in current price, they are over heated now.
- Go for Growth Stocks with Good Margin of Safety