Tuesday 2 August 2016

Time to be cautious

NIFTY: Near 8700
SENSEX: Near 28000

As earlier post was really short here I am writing this for better understanding of what I mean.

Nifty at current levels is near 24 p/e, US Index S&P 500 at current levels is near 24 p/e too. For any index, 24 p/e cannot be value territory for investors. Couple that with the lack of sufficient earnings growth in the market, It becomes ripe for a crash. We have so far avoided the crash because World Economies are printing money and sustaining their Economies, That is what US QE is (layman wise) and now they are going towards Hiking instead of Easing. We have a very strong Government at Center, We can see things improving after decades of misrule but the problem is at the Global Front.. Even US elections are around the corner and if Donald Trump sails through which I feel is possible, He is not much liked by the markets. Having said that, I would avoid making a DOOMSDAY commentary here which actually is a probability but no one can time it, I would suggest Investors to stay focused and Investment or Portfolio wise go behind stocks which are seriously in the value territory rather than buying bloated names at astronomical valuations because when Market cracked last time, Mega Bull Stocks like Educomp got finished while under valued stocks went under correction to emerge as a Multibagger in the Future. So Investors should be very cautious in the market right now.

What is at 24 P/E might go up further and trade at 28 P/E but I hope readers understand the Risk and Reward here. Disclosure: I Look to increase small position out of profits in Nifty 7000 December Put which is trading at Rs 25 right now. Hypothetically If Global Markets crack 30% and we follow suit, Nifty could get close to 6000 and in that case Nifty December 7000 Put should trade close to 1000, That is if anything of that sorts happen by December 2016 Expiry, Otherwise it is going towards ZERO so All in All its a Total Gamble with 100% risk and with low "probability" of returns buts thats just a Small Trade with Reward in favorable situation being really good.

11 comments:

  1. currently nifty 7000 put december is trading at 25rs.....so i have to spend arnd 1830 rs to buy this contract....what happens if nifty crashes to say 8400 in september?.... will i be able to sell the scrip in sepetember if i am in profits?

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    Replies
    1. at 8400 in September, time value will not be there anymore so No you won't get any good price but near Zero.

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  2. Though it is a gamble.. How do we buy 2016 Dec Nifty 7000 PUT Option.. ? I am using ICICI Direct.. it shows only next 3 months contract.

    As Diwali, GST, Monsoon around the cornor.. we may wait for some more time like 24 PE to reach and buy..

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    Replies
    1. It is high time you come out of ICICI Direct...There are many other good options other than it...

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  3. Thanks for your update. It seems that every thing is going good at domestic front but yes the international front will bring some bad news.
    Its really time to accumulate cash.

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  4. when is the next buying idea coming up ?

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  5. I had waited for almost 10 days by now to watch this 7K put price, and it has not moved much. What are your views now on this put buying. Still 7000 or to buy at upper range - let say 7500+?

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  6. Your views on India Sucrose please. Can one enter at CMP

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  7. Sir wts next now after paper rally

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  8. What is your view on Patels Airtemp?

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  9. One month without any post! Are you alright?

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