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It would be wrong to compare the current market cap with last fiscal year’s GDP. We need to compare it with the GDP for 2009-10
The market capitalization to gross domestic product (GDP) ratio of a country can be interpreted as an indicator of how frothy markets have become.
Consider the current market cap to GDP ratio. If we compare the market cap of BSE stocks on 20 November with the nominal GDP at market prices for 2008-09, we get 109%. The objection to that would be that it would be wrong to compare the current market cap with last fiscal year’s GDP. We need to compare it with the GDP for 2009-10. The Prime Minister’s economic advisory council has given an estimate for GDP growth for this fiscal last year and they had said that GDP at market and current prices for the current year will be at Rs58.3 trillion. At current market cap, that gives a market cap to GDP ratio of 99%. Notice that the only year in which that ratio was higher was 2007-08. But if the ratio is already as high as it was during the final year of the last boom, that doesn’t look too good for returns from the stock markets in future. It is yet another indication that market valuations have become very stretched.
Incidentally, Barry Ritholz of the Big Picture blog has drawn attention to the fact that the market cap to GDP ratio of the New York Stock Exchange together with Nasdaq has crossed 100%. This had happened twice before: during the dotcom boom and during the housing bubble. What it indicates is that the US market is back to bubble territory.
It’s true that the very lax liquidity conditions could propel the market cap to GDP ratios to new heights. But as Citigroup Inc. ex-CEO Chuck Prince learnt to his cost, you cannot bank on a bubble.
livemint. com/2009/11/22214403/Back-to-the-bubble-territory.html?h=A2...
Your EWT is 100% right, i m also read ewt chats, good analysis. i agree with you. ...
Dear pkk07
forget HLN, he has remained failure on 99% times, his level of accuracy is only 1%. you have presented your views and style of pesentation is also good. keep it up. Don`t worry if there is any mistake of calculation. However it is appriciable that atleast you have put up your views amongs us. ...
NO I think Offshore Services Stocks are Better... Watch out Garware Offshore....
I ask questions since like anyone else using EWT, I can`t be sure.
There are 2 possibilities I see:
1. We have completed the 5 wave upmove with the high of 5182 and we are in a 3 wave correction. The first down wave from 5182 to 4539, second upwave from 4539 to XXXX but less than 5182 and the third and final downwave from XXXX to YYYY where YYYY is lower than 4539.
I am inclined more towards this view since some other experts also believe the upmove is over.
2. We are in wave 3. Wave 3 being an upwave will complete in 5 subwaves and currently we are in subwave 5 which may take us to 5400-5600 after which the corrective downwave 4 begins which takes us down by anything from below 4500 to all the way down to 3150.
Notable thing here is that in both cases I expect the recent low of 4539 to be broken.
Not to be too enamoured by technicals only, lets look at the fundamentals too. Nifty is trading at almost 23 PE and one year forward returns from this level have always been negative. HLN says that Nifty will hit 6200 which will make Nifty insanely expensive. I don`t know what will happen but I won`t buy big-time at these prices....
I do not know the details of the seasonality of the SENSEX but November throgh April is good for Wall Street. The year end, because of bonus disbursement during christmas, is especially good. I do not see why the FII should treat this year end any differently. There is always time to dump after pump....
TO HLN,
Good that you clarified. Will be helpful to many. Else it sends out a signal that you want to trap gullible people....
But FIIs bulls may take it to recent high of 5180 or even more before November expiry !!!!!!! However, if November future closes below 5000, December expiry futures may spring a major surprise on downside. I donot rule out it going below 4500 in the next series !!!!!! Ultimately in November series 5000 and 5180 will be a major testing factor !!!!! ...
OK. We shall come to know tomorrow whether 5052 us peak or it will scale up further. Do you expect a closing below 5000 tomorrow? ...
iinvestr, Let us pray that the sardarjis in Planning Commission and South Block will not push the public in general and the investors in particular repenting for the short-sightedness of the UPA Government in not having given extension to the tenure of Mr. YV Reddy, the previous Governor of RBI. ...
nahi. but market has reached its peak....
Market is moving up only coz of continous pouring of dollars by FIIs from questionable sources. Nifty quoting at P/E 19.12 and stocks such as CAIRN, DLF, RPOWER, TATACOMM, STER are quoting at P/E of 543.56,237.37,101.51,121.02,102.89 respectively. Its not a oneway road and earnings definitely don`t support prices at this level. With inflation shooting up continously week after week, market certainly can`t rely on Sardarji in Planning Comission to save it from crashing every time. And hope he is sure that there is no blood on the dollars that is coming in. One hopes that post 2007 situation is not repeated once more. It happens only when greed overtakes logic.The higher you go, the harder you fall....
no use in suzlon buy selling stock because the company have only 5% of stake in hand soon its also comes like satyam for 25 to 30 rs soon so last year loss 700 millions in this year double of 700 million losses most of the employess having suzlon so dont buy this bad stock sell ...
Nifty may slide a bit from here as the news of Reliance acquistion may hit the stock pulling the markets lower, I feel 4850 would be the expiry for november series,
Any other fellow traders having a view, please share....
Nifty will be at 4100 TO 4200 by feb 2010...
