A few fund managers are visibly making statements like ‘this is a great time to be investing in equities…because equities are low’. Not true. If you do not know which equity share to buy (or which fund manager to back) ….you may end up buying real expensive stocks which are currently booming. If you are a direct equity fan BUT do not realise that equity buying is kinda difficult, you will be lynched. If you buy FMCG now you will surely lose your shirt. maybe pants also…read on…
Well in the year 1992 it was a bubble/boom created by Harshad S Mehta. Let us call it the Harshad boom. Largely all indices participated and let us assume that it was a all round boom – the index sent up from 2600 to 4200.
Then there was the Ketan scam. In 2000 it was clearly the technology bubble – tech zoom. Ketan boom, Ketan scam…whatever you wish to call it, it was clearly a lot of technology which was causing the boom.
Then came the 2007 boom…this time it was the Infrastructure boom. The p/e ratios of the infra companies had reached dizzying heights. Really dizzying. Unfortunately many people have MENTALLY anchored in on those prices. They are still hoping to see those prices for the infra companies like Tata Power, L&T, etc. This looks very, very difficult, if not impossible. The p/e ratio has to go up substantially for this to happen – and worse, it may not happen at all.
Is the current boom a FMCG boom? If you see the prices of Fmcg shares – Gillette has a price earning ratio of 135.
Will we worry about this boom after a few years? or will we react now?
PS: Personally / in my family we do hold Gillette, HUL, ITC, Colgate, PnG, Dabur…..and could be other shares in the portfolios of the mutual funds that we hold.
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