Wealth Management

 As i write this - it is May 2021 and the Index (nifty) is at 14630 Levels. As you may remember - Feb 2020, the Index was at 12500 levels. It tanked almost 40% to 8000 levels and rebounded. While the world has been ravished by the Covid virus and industry grappling with major issues, stock market rebounded and with an optimism which cannot be fathomed, reached 15,000.

Today the market is sluggish at 14500 levels and every one is thinking when is the next crash. I just want to present to you an alternate school of thought. The Nifty PE was at 25 levels before the Covid scenario. Covid also resulted in a lowering of earnings for many of the companies. Inspite of that the market went up and its reflected in the super high PE of 41 now - see chart below.. (i have only plotted till feb 2021).

While everyone expects that market will crash and bring the PE DOWN to 25 levels, my view is that the market will consolidate and stay between 13000 and 15000 levels for next 18 months and allow the earnings to catch up. This earnings increase will result in the P/E becoming more saner and lower at 29 levels before the next upmove. So i do not see a crash happening - i see a sideways movement, allowing nifty stocks  a breather to increase earnings and reduce PE while maintaining index. 

Hope this POV is helpful and let's see how it pans out. My view is - there is a correction possible to make the P/E go down to 26 levels which means at today's earnings, the NIFTY could reach 12000 levels -but i see less chance of that happening. i see more chance of earnings rising and NIFTY remaining at these levels.