Market investors will rejoice today as the Nifty went up 2.5% to reach 6140, in reaching distance of the all time high of 6312.

(Click for larger picture)

Note that both the 50 and 200 day moving averages are pointing upwards again, and in very short time we have climbed 12% to reach these numbers again. Where do we go from here?

The Bullish View

We are not at new highs, despite the large upmove we have had so far. Japan is, and the US is. A new high is what describes euphoria.

The P/E ratio isn’t insane. We are still at 18 levels (on standalone, trailing 12 month earnings), and the consolidated numbers will give us even higher earnings. This is pretty much where the Index has been for the last 10 years or so. Remember, at the last two times we were at these highs, the index P/E was way above 22.

EPS Growth is at 15%, which is close to the highest EPS growth numbers since 2011. If EPS growth is returning, paying a higher P/E for our market makes sense – and the P/E isn’t unnaturally high.

Liquidity remains strong worldwide. With the …

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The Nifty was up 4.4% in a reversal month of April, 2013, bringing the Year-To-Date return up to a marginally positive number (0.4%).

May has traditionally been a volatile month, skewed largely by the 28% move in 2009 (post elections), –17% in 2004 (again, post elections), –14% in 2006 (after RPL’s IPO and a quick drop) and large moves in the 90s.

May has the highest standard-deviation which tells you why the “average” means little. Given that, it may be useful to trade calls and puts (straddles or strangles) that will make money on large moves in either direction. However, I would do this closer to the 10th of the month to lose lesser and lesser from time decay.

The Sensex, too, has done well, but only a 3.5% move:

And finally, that 2013 is benign upto April. If it’s anything like other such benign-till-April years of 2007 and 2010, it’s just likely to go up.

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When you hear comparisons of the Nifty with another investment, a mutual fund, or an insurance policy or such, you tend to look at their “outperformance” as something they’ve done right. However the pure Nifty return does not include dividends.

The Nifty is simply something based on the Market Capitalization of the largest stocks (weighted by their “free float” – i.e. non-promoter – market capitalization). When stocks provide dividends, an investor in the stocks can receive and reinvest those dividends back. The Nifty does not reflect this – the cash flow is somehow “lost”.

An investor in the Nifty stocks in the same proportion as the Nifty will see a better return than by just looking at the Nifty itself. Dividend yields have been very low – 1-2% a year. However, over a 5 to 10 year period, the outperformance can be significant.

The NSE publishes a Total Return Index which is the Nifty including dividends reinvested. Using that data, we can see how much dividends have impacted your return.

A 10,000 rupee investment in 1999 – the first time the Total Returns Index was published – would have given you Rs. 49,710 if you looked purely at the …

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Following up on my post about the lack of volatility in the last few years, I have now added another chart – of weekly moves of greater than 4%. The chart below shows instances of moves at the end of every week where the index has gone up or down by over 4% over the [...]

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In the last few weeks the index has moved a lot. From the highs of 6000+ on the Nifty in Jan, it is now below 5,500, a drop of more than 10%. But are we really seeing volatility? The answer is, really: No. We may have moved a little in three months, but let’s look [...]

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Because of the budget posts, my monthly move post got delayed – to today. The Nifty had a negative month, down 5.7%, taking Year 2013 to the negative zone. The damage was much more in the midcaps, which doesn’t reflect in the indexes. Another post on that, another day. And here’s the bigger post about [...]

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The Nifty’s reported Price to Earnings Ratio – revealed by the NSE every day – can be compared with the growth in actual underlying Earnings. Earnings growth, which was 16% year-on-year as recently as 31 Jan, has dipped to 11.86%, while the P/E (on a standalone basis) is still 18+. The October quarter showed some [...]

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November 2012 saw a good run on the indexes, with both the Nifty and Sensex going up more than 4.5%. This is way better than November last year, which was a hugely negative 9.3%. The Sensex has done well for itself too: The last 10 years have been largely, very positive. As you can see, [...]

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The volumes on the stock exchanges don’t seem to impress, although we are at near term highs on the Nifty. Notice how the volumes have been around 10,000 cr. per day or less, in much of 2012 (except Jan/Feb and then in Sep/Oct). The number of securities traded today are around 40% more than in [...]

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Time for the monthly update. The indexes fell for the first time since May. October is the worst month of the year, historically speaking (but this is skewed by the huge fall in 2008). The Nifty was down 1.5%, but most of the fall was in the last few days (in fact, the Nifty closed [...]

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