INDEX 2016 - PE ANALYSIS & OUTLOOK

PE Ratio can tell you the valuation of the market

(overvalued, undervalued or rightly valued)

Month	P.E
Jan	20.34
Feb	19.34
Mar	20.39
April	21.29
May	21.51
Jun	22.52
Jul	23.33
Aug	23.65
Sep	24.08
Oct	23.35
Nov	21.99
Dec	21.45

One of the greatest Investor Warren Buffet says “The stock market is filled with people who know the price of everything but value of nothing” What does he wants to convey when he says PRICE and VALUE and is there any difference between these two.

From the above data we can clearly see that there is a direct relationship between Index and PE ratio followed by FII cash Based Buying and Selling Data.

In the Month of Feb when PE ratio touched 19 we saw FII buying in cash Market which was Lowest for the year 2016 in the Month of March and as soon as the PE Ratio Touched 24 which was Highest for the year we saw Net sell figures from thereafter in Oct, Nov and Dec. People May Argue it was due to domestic events such as Demonetization but let’s see the historical data.

If you see the above Picture It can be clearly Seen that Markets Over the Last 16 Years have traded in a band and there is always Buying opportunity as it goes below certain levels. We can  See that Markets Top out Near 24 -26 PE Range and provides good buying Opportunity Near 16-18 PE Range.As time has gone by PE Ratio Range(Band) has reduced Considerably From 1999 To 2016. At Current Level of 8050 on the Nifty Which is trading at 21 PE Market looks to be reasonably priced and we expect market to create a panic Bottom Around 7800 levels in the Coming days on the down side and the maximum Downside is caped around 7500 Levels. On the Upside 8500 looks to be serious hurdle for the market with Maximum Upside of 8700. (Views are for 3-6 Months)

Disclaimer :- AS OF TODAY I AM NOT A SEBI REGISTERED RESEARCH ANALYST.ONE MUST ALWAYS CONSULT FINANCIAL ADVISOR BEFORE INVESTING.The idea of writing this article is to create awarness amongst investor.