What Mr.Manmohan Did Not Tell Yesterday?But Market Knows.

April 4, 2013

What Mr.Manmohan Did Not Tell Yesterday?But Market Knows.

Greetings from Hitesh! I am happy with the responses I got on my last email on Gold. I did not want to come back so fast, however, yesterday our PM came and talked about many things and market went down. Strange ! Isn’t it? Let my try to read what he had not said. But first, let us see what he said.

Mr.Manmohan Singh talked about reforms in FDI, Coming reforms in financial and other sectors, Managing Current Account Deficit, Poor World Economic Scenario. His argument was…. “India has grown at 7.5% in last 15 years and at 8% in last 10 years and these can not escape suddenly.”

What Market Knows?

In normal course of business, you sell goods/services, your customer sends you the payment, you deposit the cheques and the life goes on. However, when you receive a call from your customer the day before you are supposed to deposit the cheque and tells you a good story about his new ventures…..you know that he will ask you to wait for some more days before you can deposit your cheques.

Just compare this with Mr.Manmohan Singh coming to us when the Earning Season is about to start.

Current Earning Season:-

With the results season about to start, the FY 2013 EPS growth of Sensex is likely to come around Rs.1200, lower by 10%. Naturally, FY 14 EPS will also get downgraded due to this. It will be around Rs.1300.

At current Sensex of 19000. the Sensex P/E works out to about 16 (19000/1200) times and for 2014 EPS it is around 15 times.(19000/1300).

What He Did Not Tell?

While he and his team of able ministers have taken due steps to increase the growth, from inside they know that the growth they are talking about will only come in second half of 2014, if everything goes as per their plan !! And Market knows this.

What it means for you as an investor?

At 14 P/E market is near its historical bottom and if you are really a long term investor, this is the time to pick and choose.

Indian economy is growing at 4.5% to 5% against the world economy growth rate of around 2% and US growth of around 1.6%. Knowing this and keeping above calculations in mind, FIIs have invested another Rs.45000 crs till 31^st March 2013 in Indian Equities.

My Personal Call:-

We maintain our call to pick and choose till July 2013.  

You can follow my @hiteshmparikh on twitter.

If you need personalized guidance, do write to us.

Live With Passion, Invest with Passion.

Hitesh Parikh.