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When should investors start bottom fishing – What does history suggest?

On an assumption of no earnings growth in FY21e for Nifty, the parity between bond yield and earnings yield is achieved at a Nifty level of 8432, and a market correction below that level is unlikely to sustain for long

March 16, 2020 / 11:30 PM IST
When should investors start bottom fishing – What does history suggest?

PRO Only Highlights
Quarterly performance largely backed by improved realisations
Medium-term triggers China plus and protectionist measures for tyre industry
Valuations not inexpensive; but improved medium-term outlook

Highlights -  Investor psychology in every crisis is the same - Bond yield versus earnings yield has served as a good indicator of market bottom - At the peak, bond yield far exceeds earnings yield - At the bottom, the gap narrows, can turn negative - A negative gap between bond and earnings yield do not last for long - Assuming 10% earnings growth for Nifty in FY21, a level below 9275 on Nifty is worth accumulating gradually - Under extreme pessimism, if no earnings growth is there in FY21, market decline...

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