Market corrections are good for investors but for traders, it could be a nightmare if you get caught on the wrong side of the trade. A similar story panned out in 2008 when S&P BSE Sensex was trading above 20K and Nifty above 6000 levels.
But, things took a turn in global markets which turned the tide for Indian markets as well. Benchmark indices suffered a fall of more than 50 percent in that year, which wiped out more than half of market capitalisation in a matter of months.
In falling markets, most blue chip names suffered a big fall but investors should remember that any fall due to external factors and not company-specific is a good buying opportunity.
Investors who made their investment back in 2008 are a happy lot even after 9 years. Some stocks have given return up to 7,000 percent in the same period.
Stocks which delivered multibagger return include names like Eicher Motors (7107%), followed by Aurobindo Pharma (1338%), IndusInd Bank (1150%), Lupin (822%), Asian Paints (809%), Maruti Suzuki (705%) Motilal Oswal said in a report.
Biggest gainers from 2008 peak with respect to market cap ranks are: Maruti, IndusInd Bank, Ultratech, Asian Paints, Eicher Motors, HDFC Bank and HUL, added the report.
We have come a long way from 2008 and things have improved considerably over the period of time, the report added. The macros are in place, the GDP growth is still the highest compared to developed economies, expectations of double digit earnings growth, reform push by the govt also helped sentiment and domestic liquidity which from mutual fund lend support to market whenever foreign investors booked profits.
Although markets could see intermediate correction anytime in this bull run, but, this time it is different unlike 2008. It is a DII-led rally that we witnessed in 2017 and if earnings show consistent trend, new highs are here to stay. Some experts see next 5000 points on Nifty in next 2.5 years.
The Nifty just touched a historic mark of 10,000 for the first time in history this week since its inception back in the year 1995.
Indices were also trading at record high back in 2008 when the fall happened but this time it is different and any dips should be used to buy into quality stocks.
“The markets have closed above magical figure of 10,000 which is a phenomenal earlier this week. The spectacular run-up in stock prices over the past few years goes on to re-affirm the India shining story which in turn is driven by macro-economic condition and fundamentals of the country,” Nitasha Shankar, Sr. Vice President and Head of Research, YES Securities (I) Ltd told Moneycontrol.
“Our recommendations to long term investors is to remain invested in these markets as the India shining story still has a lot of steam in it,” she said.
Shankar further added that things are improving and we expect the market to continue on this journey upward, though there will be some days of profit booking which would only be prudent.
How are valuations looking?
Indian markets are trading at valuations which are 25 percent above long-period averages and 19 percent premium to January 2008 levels. The index has rallied over 50 percent from its peak seen back in 2008.
The Nifty trades at a trailing P/E of 22.3x, at a 25 percent premium to its own long period average. Comparing the Nifty’s current valuations with those of January 2008 (earlier peak), we note that the index now trades at a 19% premium, said the Motilal Oswal report.
“Nifty trailing P/B, at 3.1x, is at a 10 percent premium to LAP, but at a 22 percent discount to January 2008 P/B of 3.9x. Nifty RoE stands at 13.7 percent, a tad below its long-term average of 16.1 percent,” it said.
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