The caveats first – I do not know where the markets are headed. I could have even said “Markets are about to crash” – and it could have been an equally successful clickbait.

I do not know where the US Markets are headed, nor about where the Indian markets are headed. Let us look at some of the theories being offered.

  1. The Fed is pumping a lot of money: Poor argument as far as I am concerned. Europe has negative interest rates, Japan has close to zero, and so do many other countries have. Even Indian rates are low – in fact, it is the same as the USA – subject to the currency risk cover. So technically Indian markets should also be booming, and it is not.
  2. It is a concentrated rally: Absolutely true – 5 companies in the US are rocking, and 2-3 companies are rocking in India. This is a measurable fact – in fact, the market is becoming a “Winner takes all” market.
  3. It is a good rally – the companies which are going up are the companies which are increasing their market share, are able to attract talent, have tons of cash, and have built an awesome moat. Again partially true. Companies like Coromandel International have surely gone up far ahead of the market.
  4. The market is looking ahead of 2021: Every analyst feels that the market is ignoring the 2021 results. I find this funny, because the results were bad in 2019 also, and we are not seeing good Quarterly results from corporate. So this is difficult to accept.

Having said all this, I am sitting on cash, but also did a lot of buying – PSU (dividend yield), airlines, power, infra, nbfc, hotels, etc. I love the dividends pretty good!

Related Articles:

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

  1. If we have a water tank filled with water initially, with one inlet pipe (earnings) and one outlet pipe (dividends). The inlet pipe is shut closed (earnings only a trickle), and outlet pipe is kept open, we will run out of water in tank (book value) soon. water in tank (price paid for share) will be what we get back through outlet pipe in installments (dividends). In US they have connected the inlet pipe to the artificial ‘free money’. In India it is not connected anywhere. Only an ‘expectation’ that inlet valve will open with earnings soon.

Leave a Reply