Well many people call me ‘negative’ (no I am not cribbing, just observing). Let me tell you why. I have a lot of respect for Madhu Kela and just as much as for Sunil Singhania. In fact SS (in my limited knowledge) seems to be the only senior fund manager prepared for the impact of XBRL / IFRS – which is being implemented from April 2011, but that I will reserve for another post.

Yesterday I watched Nikunj Dalmia’s interview of 4 intelligent people – including Madhu Kela. Nikunj as usual asked Madhu for his view on the market for the next 3-5 months. Madhu said ..in the next 3-5 years it could be very high.

Nikunj asked HOW MUCH please specify. Pushed to the corner Madhu said “In 5 years it could be as high as 30,000.

This, Mr. Madhusudhan Kela, means a growth of about 7%.

Mathematically this is not challenging, correct?

Have love and make fun!

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  1. Madhu Kela’s numbers are pretty surprising. If that is the case, we would be better of in FDs. City Union Bank’s FD gives 8% per annum.

    Some AMC staff has been telling me that their fund managers are of view that if the liquidity flow from FIIs continues the same way, Sensex may even touch the level of 30,000 in next 18 months itself. A whopping 27% annualized returns. When asked whether those kind of valuations are sustainable, as we would be in a bubble zone, they say that the “markets would take a call” then depending upon the fact whether the growth in our numbers justify those valuations.

    Well I cannot forget the fact it is the same people who told me that their fund managers were of view that Sensex would touch 4000 in the end of 2008.

    It looks like that FIIs have already started discounting FY12 valuations, when we are good 6 months away from FY11 itself. Short term forecasts are unpredictable. So are the greed, fear, ignorance, hope and human madness.

    Those interested can read “Confessions of a Wall Street Analyst: A true story of inside information and corruption in the stock market” by Dan Reingold

  2. It is really funny if you have been there long enough in the Indian markets! When the index was 21000 the sales guys of mutual funds and ulips (quarter knowledge?) were saying that their fund managers were still bullish. This was easy to understand – they believe ‘the trend is your friend’. Then when the markets came to 18000 they were saying – AVERAGING IS GREAT – because the market will go back to 21000. Well this is what they said…

    Then at all prices they wanted us to average…then at 9k they said 7500 is the bottom. Well when the market recovered, the sales guys said..it will reach 14k in a year. It reached 18k.

    Now they do not know what to say. There is not any logic in asking us to buy at 18k (4 years back) and now saying it is over heated 🙂

    What to do? SIP in a good fund…and have reasonable expectations

  3. My RM sent me a mail with the following wordings:
    “…Given the current market levels, would recommend that we book profits and invest into MIP’s.. ”

    I am not surprised!

  4. Subra, the magic is in the number. 30K, 35K, 50K. The numbers that attract us. No one really cares about compounding or indeed, inflation impacts.

    We hear financial planners and insurers tell us how to become a crorepati in 20 years by saving some 10,000 per month. In 20 years, 1 crore will buy only what you can buy with 25 lakhs today, considering 7% inflation. but the number – 1 crore – is a great pitch.

    I think Madhu Kela and indeed many top fund managers are watching the rally with disbelief. And a little relief because their allocations to midcaps have done better than the Sensex/Nifty. But in the end they can’t use the current numbers to really predict, so they throw us a number. Numbers are good. Worst case, we’ll just forget their predictions – best case we’ll make it there next week.

  5. Madhu Kela number of 30000 Sensex value is just a number and as Subra says, he was pushed to a corner and he said this number. It may well could have been 35000 or 25000.

    If 7% is the Sensex growth, from the available history to go by, it is very likely that Madhu Kela and his ilk (includes Prashant Jain) will easily do better than that. If pushed to a corner :(- (no pun intended) I will say that they will do 10% as against market 7%. 10% is not bad at all,taxfree; and still better than many other options around.

    As Asoke said, ignore market predictions; Do SIP in select good funds. You will likely smile at the end of the day.

  6. Jeez! 30K? That’s all! I’m surprised he didn’t say 50K (or 100K for that matter)!! I don’t even know why people even watch news channel these days. We’ll all be far better off doing our own homework than listen to some “intelligent” fund managers throw in an arbitrary number.

    One (serious) piece of advice – if there’s one thing that is worth watching in news channels (especially business news channels), its the female anchors (though I think Fashion TV is a better alternative). Joy! But don’t take them or their “news” too seriously.

    One REAL (and serious) piece of advice – invest in 2-3 good stocks, or the broad index, SIP style and sleep. Good news? Provided you sleep well and be simple in your approach, returns will be decent. The bad news? It requires common sense and patience – two traits that very very very few people have. If you don’t have these, then the stock market isn’t the place for you. You’d be far better off punting in a casino or playing high stakes poker.

    As for Kela, he’s just a bloke with a job that requires him to showcase his ego make arbitrary predictions. That’s the perquisite that comes with being a fund manager, in case you didn’t know.

    Have fun!!

  7. Imagine in 2003 saying “in 7 years the markets will grow to 20,000″ i.e. 7 times in 7 years. You would have been lynched. I remember when the market was 6k the great Shankar Sharma screaming at RJ ‘now that the index is 6k…you want the poor middle class investor to invest? This is wrong’.

    To predict markets (a stupid and unnecessary game) you need to be a maverick..or like subra have the guts to say…”take it or leave it” ..So Subra what is your prediction?

  8. As any veteran in equity market knows, the analysts there are just to make noises and justify their existence (and fat salaries too) while looking very knowledegable. It is the same story everytime, unless they themsleves have contrary positions to the market movement. At that time they try to influence the market by saying what suits them. I personally know two poor fellows who were paying hefty advisory charges from a very, very well known fat analyst who still appears frequently on CNBC. Unknown to that analyst, both were friends and while comparing notes, they found to their horror that while one of them was getting BUY call, the other one was getting SELL call for NIfty Future FROM THE SAME FELLOW AT THE SAME TIME. Naturally, one of them had to lose and one of them wins. Over time, both the poor fellows had their 10 Lac portfolios brought down to zero thru heavy F&O losses.

    It has been well documented now that many time these analysts and ADVISORS exactly do the OPPOSITE of what they say on TV, including RJ himself. Since big names were involved, obviosuly the things were kept under wraps, a small step here and there (like Banning that Shankar Sharma from trading) notwithstanding.

    If I were a fund manager and had so great insights, I would be much better earning through trading rather than working for somebody else. The truth is, you don’t have to be very sincere if you are handling somebody else’s money, right? Till 13 Jan 2008, every analyst was screaming BUY while promising indices at 25k-30K within 3m/4m/6m including RJ. After 2 days of crash, the same fellows were screaming blue murder and predicting 12k,14k and even at 7900 levels(oct 2008), these fellows were in favour of 4000 when market turned around. I have on record the greatest gift to man kind Shankar Sharma predicting 12K in Nov 2009 and then again the same levels in Feb 2010. We all know where the market went.

    Gosh, it has become too lengthy. Maybe I am getting infected…;).
    Just a bot of parting suggestion, DON’T EVER PAY FOR ADVICE, ESPECIALLY FOR TRADING EQUITIES UNLESS YOU KNOW VERY VERY WELL WHAT YOU ARE DOING.

  9. Subra,
    You have the knack of ensuring people write much more than the blog piece itself. The comments here are quite sensible and showcases the type of people who are following your blog.

    All said and done, NOBODY can predict the way market goes. Patience will not only pay dividends but also capital gains. You need to work hard and still take a bet on a stock / fund.

    All the best, friends.

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