Markets fell by 340 points yesterday and has fallen 260 points already today. For people like us markets means sensex! So what to do?

I have so many panic sms coming to me! The worst thing to do is to stop the sip! Remember if you had a COMPULSORY SIP….you would have continued to invest, right? Treat the SIP as an EMI of your dreams….

Markets are driven by 3 factors – Earnings of the companies, the future expectations (price-earning ratio) and the liquidity in the market. In the current market earnings are at their peak – the next couple of quarters is likely to see flat or slowing down of the earnings. This itself reduces the price expectation (or the p/e goes down) and the Greece problems (Euro) and the US down grade might mean some FII money could get pulled down.

So the market is surely headed down, correct?

Well not so fast. What I told you in para 1 is known to everybody in the market – so you could argue that all this is already played out and therefore the market will remain stable. Difficult to say.

MY PERSONAL view is that some shares in everybody’s portfolio would be overpriced and therefore STILL worth selling.  Some shares would be worth buying. For example I think the portfolio of Tata Investment Corporation would have come down – so the share will come down in sympathy. However if you think the portfolio is good, the share may be a good buy. Frankly to me it does not make any difference – I hold TIC in my portfolio – and I do enter and exit this share once in a while. When the market falls, the nav of this share falls, but the discount also increases…so it becomes a good buy. It is the only finance company which is purely into investing. I prefer this to any other fund scheme especially when the markets are low.

Are the markets low? Is the fall over? Frankly I do not have an answer to both the questions.

Can the market go down to 15,000 sensex? No answer again.

Let us ask the question a little differently….

Will people stop brushing their teeth? Shampooing their hair? Buying a motorcycle? Buying a car? a house? Taking a vacation? I guess the answer is simple…Something people postpone (Mahindra Holiday Resorts, Sterling Resorts), but Hindustan Unilever, Colgate, PnG, Gillette, Hero Honda….will continue to earn money.

So one quarter may be bad, 2 quarters may be bad….but then interest rates will start going down, and markets will revive. We have seen this happen, have we not. A day is followed by a night….of course there is waning and waxing of the moon…and like they say…kabhi kabhi Amavyas ho jati hai! So relax. Stop watching TV….or watch Discovery.

If you are in the mutual funds continue your SIPs – those people who continued their SIP in 2008 and 2009 are better off compared to those who shut it in 2008 waiting for the market to improve!

PS: was just going thru my portfolio – the multibaggers like Coromandel International, Carborundum Universal, Wendt, Cummins, etc. HAVE NEVER BEEN MENTIONED (LEAVE ALONE REVIEWED) ON ANY CHANNEL….is that an indicator of what to buy? L O L….

Related Articles:

Post Footer automatically generated by Add Post Footer Plugin for wordpress.

  1. Stocks have tumbled after the S & P downgrading and I’m glad that someone stood up and told the American’s what their debt meant to the markets.

    Some ego’s will be deflated and soon the markets will re-arrange around the new emerging realities.

    At least I find that the Stocks in the Indian market are becoming attractive: what level down they will go – I have no clue but nothing much has changed fundamentally here – so the fall here coupled with falling crude needs to be considered seperately from the US degrading.

  2. Stop thinking about SENSEX nose diving, it will only give heart-aches… think only of the last 3 letters of SEN[SEX] for now!!

  3. I remember that some FMCG company executive commented the same thing – that demand for their premium products wont decrease. But it did decrease and decreased by a handsome margin.
    I usually don’t memorize brand names but interested people can go through balace sheets of US FMCG companies for last 3 years 🙂

  4. addition to my last comment.
    The FMCG company was US company and executive was talking about their brands in US.

  5. Dr Mohammed Ali Khan

    I wonder how all the Nobel prize- winning “Economists” like Krugman must be feeling now when they called Gold a ” barbarous relic” and a stupid investment. Gold is at USD 1750 per ounce right now.

  6. Hi,

    How to buy Tata Investment Corporation?? I am not able to find such share in market.I dont know wheather i am searching in right way or not..

  7. @Ashok, you are right….you are not searching in the right way. Pls try again with different websites, try NSE website also.

  8. Gold is a barbarous relic and a super stupid investment. Paul Krugman is right. There have been times when gold sold at the same price of salt. The owner of gold thought the owner of salt is STUPID because he was exchanging something useful for something that can only glitter. J M Keynes said ‘the markets can be irrational far beyond you can be solvent’. As long as I do not hold put options on gold it does not matter. When gold prices come down, you will find that there is no refuge, and there will be no buyers. This has happened in the past and will happen in the future. Assets not backed by inherent cash flows are supported by ‘A greater fool theory’. Tulips are the first documented asset class. The membership at BSE was once worth Rs. 4.5 crores (Barclays the great banker bought it!) this was in 1992 (perhaps) it is worth Rs. 10 lakhs

  9. When gold prices go down we will have at least ornaments left with us. What can we do with stocks? Stock market actually is like a handicapped man, always looking at Govt. for support.

    Owning salt, or any item which can be used by others, is not a stupid idea. I do not see any alternate use for stock certificates or notes.

  10. I will ask Subra the following 3 questions that Ron Paul asked The Bernank

    1. When you wake up in the morning, do you check the price of gold?
    2. Is gold money?
    3. Why do central banks hold gold, and not diamonds?

  11. When I wake up in the morning I go about doing my work, do not check the price of gold, sensex, real estate, or diamonds.

    Gold is a barbaric relic and in times of panic people follow the herd.

    If the way central banks manage money is the way all of us managed, none of us will be able to retire, ever.

    There will be periods of time when one asset class does better than others – means nothing in valuation terms. Oil would have performed better than gold over various points of time. Why even derby horses – have u ever held horses? or portfolios of put options of subprime, they have outperformed gold by a mile.

  12. Hi Subra, can you write some article on Options as I think that is the area to make Good money and to destroy all at once. I would like to hear your views on this type of Investment.

  13. Dr Mohammed Ali Khan

    @ Subra
    Of course Gold is not an asset or an investment..
    Gold is MONEY.. Has always been, since the dawn of civilization… Will be, till they invent a process to convert iron into gold.
    Keynesians or ” Nobel-laureate ” Krugman calling it a ” barbarous relic ” does not change the fact.

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes:

<a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>