An easy to understand, small and simple presentation to show how good is the present stock market situation for the small and retail investors looking for good profits in near future.

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Now is the Golden Opportunity
in the Equity Market
Sensex is back to 11,000 points!!!
i.e., Sensex @ 19,000 today = Sensex @ 11,000 in year 2009
And Nifty back to its level in the start of FY 2009-10!
By Girish Kodashettar

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Today (16-Aug-2013), after a big fall,
NSE / CNX Nifty is at 5,508
BSE Sensex is at 18,598
4%
Forget about at these levels, even at higher levels (Say, Nifty 6,000 or Sensex 19,000), stocks
are available at very cheap prices.
Many a times people ask me:
Aren’t Equity Markets at current levels are near to highest levels? Is there any potential for
further growth?
Obviously, what they are comparing it with is previous highest levels (Nifty 6,300 /Sensex
21,000) that were attained by these indices.
The fact is that, since recovery from 2008-09 recession, though companies have posted
profits year after year, they kept on growing but, for various reasons their stock prices have
not moved up to reflect the companies’ worth.

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To understand this more clearly we did a simple study.
We’ve noted the Important fundamental ratios (PB* & PE**) of the market / index
(Nifty) at current level and then checked the historic values of the same index at the
same values of the fundamental ratios.
So, Let’s have a look at what we found.
*PE : Price to Earnings Ratio =
Current Price of a Share
Earning Per Share (EPS)
Description of PE ratio @ Investopedia.com
Video about PE Ratio @ Investopedia.com
In case of our study, the Current Market
Price and EPS considered is of Index
(Nifty) which is weighted average of all
stocks in the index
**PB: Price to Book Value Ratio =
Current Price of a Share
Book Value of a share (BV)
In case of our study, the Current Market
Price and BV considered is of Index
(Nifty) which is weighted average of all
stocks in the index
Description of PB ratio @ Investopedia.com
Video about PE Ratio @ Investopedia.com
Smaller the PE no. better is the investment opportunity
Smaller the PB no. better is the investment opportunity

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Source: http://www.nseindia.com
PE, PB & DY of Nifty for a
period from 06-Apr-2009
to 05-May-2009
PE, PB & DY of Nifty for a
period from 17-Jul-2013 to
16-Aug-2013

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So, as it can be seen,
the PE and PB of 12-Aug-2013 very closely match
to the values of PE and PB on 29-Apr-2009.
Now, let’s see where were markets (Indices) on
these dates.

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Source: www.moneycontrol.com
On 29-Apr-2009, Nifty Closed at 3,474 points On 12-Aug-2013, Nifty Closed at 5,612 points
Now PE @ 16.5
Then, PE @ 16.5
NSE / CNX Nifty

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Source: www.moneycontrol.com
On 29-Apr-2009, Sensex Closed at 11,403 points On 12-Aug-2013, Sensex Closed at 18,796 points
Now PE @ 16.5
Then, PE @ 16.5
BSE / S&P Sensex

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Now, don’t get confused or misunderstand this info by misinterpreting it so that for the
given (today’s) PE and PB, the correct Nifty index level should be 3,474 and Sensex
index level should be 11,400! That will be a blunder!
The right way to look at is this: Last time when PE and PB were equivalent of today’s,
then Nifty was at 3,474 and Sensex was at 11,400.
From there both indices have risen to today’s levels (5,612 and 18,946 respectively).
But even today, at these higher levels, indices correspond to the same PE and PB. That
means, stock prices and hence the indices have increased their value to the extent PE
and PB are maintained at the same lower levels. So it implies that, market (and large
number of good quality stocks) is undervalued, the way it was during and just after the
recession period.
Now, Let’s do the same study for prior recession period when markets / indices were at
the same levels in terms of points (beginning of bull run) and check what were
Fundamental ratios at those levels.

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PE @ 16.5, PB @ 2.78
NSE / CNX Nifty
Then, Nifty @ 3,430 Now Nifty @ 5,600
On 12-Aug-2013, Nifty Closed at 5,612 points
Refer Next Slide
On 30-Aug-2013, Nifty Closed at 3,430 points
Refer Next Slide
PE @ 19.25, PB @ 4.58

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PE, PB & DY of Nifty for a
period from 17-Jul-2013 to
16-Aug-2013
PE, PB & DY of Nifty for a
period from 01-Aug-2006
to 31-Aug-2006

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BSE / S&P Sensex
On 23-Aug-2006, Sensex Closed at 11,406 points
Then, Sensex @ 11,400
On 12-Aug-2013, Sensex Closed at 18,796 points
Now Sensex @ 18,800
PE @ 16.5, PB @ 2.78
PE @ 19.25, PB @ 4.58
Considered for Nifty; it will almost same for Sensex as well
Considered for Nifty; it will almost same for Sensex as well

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That’s the evidence that, today market valuations are more attractive than when Nifty was
@ 3,400+ or Sensex @ 11,400+ seven years ago.
From those levels stock markets rallied to grow by 80%!
So, now you can guess (estimate) what is the potential of Stock market for further growth.
Are you easily seeing Sensex @ 30,000 points or Nifty @ 8,500 points in
the days to come?!
So, what you should be doing now?

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According to me it depends on what who you follow (admire):
Herdy
Mr. Herdy
He has big fan club and big no. of followers on Facebook and Twitter.
He advocates that all his followers should stay away from the stock
market now and should wait until the markets have really gone up
and when there is lot of ‘action’ happening!
Mr. Buffetty
He advocates fortunes are made during the times like these.
He suggests his followers to invest for long term in equity and
especially when stocks / markets are undervalued.
Our Suggestion: If you belong to this group, simply do what Mr. Herdy tells you
Our Suggestion: If you belong to this group, refer the next slide

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1. Though markets at these levels are too attractive, they still
remain Volatile.
2. If you are looking for making good returns on investment in
next 2-4 years, you should be investing now.
3. If you are not a domain expert in the investments and if you
are not a High Net worth Individual, please take Mutual Fund
Route for your equity investments. Professional fund mangers
are better qualified and equipped to fully exploit the available
opportunities and handle volatility in a better way.
4. Seek help from Investment Advisors

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