Market commentary – Nov 2017 Markets top when you find no reason to worry ………. Be worried!!!

Just like 1929 and then 1987, and then 2001, and then 2008!!!


So stock market is at all time high and there is so much gush of liquidity that all investors are astonished. Even after so much of FII selling, markets are at the top because of support from the domestic investors.  With every Mutual fund manager brainwashing for SIP’s the markets may have no dearth of liquidity in near future. Mutual funds which are 100% invested all the time are the happiest lot and fund managers who are or were waiting for markets to correct are having a hard time.

 Big bull of dalal Street has been saying this day in and out in every interview from 2002 and now after 15 years his words are coming out to be true —

“The big bull is of the view that the flow of money from Indian households has just started, thanks to demonetization. Tsunami of local money will come into the local market. Morgan Stanley is predicting that USD 425-825 billion in the next 10 years to flow into markets,” said Jhunjhunwala.”

Value investors and managers who bet on market volatility and hold cash as of now are having their worst nightmares. It’s very difficult to deploy cash and buy stocks with these sky rocket valuations. Markets it seems is making e mockery of all value investors who are holding cash are seeing Crap stocks hitting Upper circuits every day.

“The market can remain irrational longer than you can remain solvent.”

Our own domestic investors are the happiest lot of all. They have made money in small and mid-cap stocks and now their valuations have reach to a different level all together. So as history is again repeating, retail investors have found shortest and surest way to make money and the bubble will continue.

Only respite in these times are the Bitcoins, in which retail investors and the gen x are investing and making more money they any other time in history. This has resulted in some of the money getting diverted from Stock market to the bit coin markets. The fuel in the fire is added by with apps and What’s app /twitter. These apps have made investing so easy through mobile phones. The casino like mentality is back but is more in Bitcoins then stock market hence some respite.

Also, as they say investors have short term memory and everyone is forgetting 2008 crash, which wiped billions of dollars of paper wealth. If you read about Michael Bury it took him 2 years of wait (And wait is so stressful beyond imaginations resulting in self-doubts) after which the bubble busted and he made his billions.

But, Investors who have really worked hard after 2008 crash and kept on waiting for the right stocks and sit tight all through these years, are now laughing all the way to banks. History always repeats itself there are extreme negative times like 2001 then lots of consolidation 2001-2005, and then extreme optimism 2007-8 and the cycle repeats extreme negative 2008-2009-2010, Consolidation 2010- 2016, and now extreme optimism 2016—- to …… Who knows?? Pendulum always swings only no one knows when? Also more extreme it goes to one side more momentum it has towards another. Higher the stock market more it falls. Rapid the rise rapid the fall.

Now with pendulum at one extreme we remember two people Warren Buffet and Rothschild

Warren Buffett — ‘Be Fearful When Others Are Greedy and Greedy When Others Are Fearful’ 

 “The time to buy is when there’s blood in the streets.” He should know. Rothschild made a fortune buying in the panic that followed the Battle of Waterloo against Napoleon.

Some other news which we read this week –

  1. Big bull has sold his some stake in Delta corp at Rs 280, which he invested at Rs 50 and then Rs 100 . See the valuations!
  2. Even Jeff Bezos sold some of his shares in Amazon (Some means 1.1 billion dollars). Even he believes it’s at the top of the valuation after FANG rally.
  3. One of the biggest bitcoin exchanges just added 100000 users in a single day .

What are some signs of market top (As per conventional wisdom)—

  1. There is no reason for markets to go down. Even you try you can’t find one. All things are perfect for bull run to continue.
  2. Retail investors have joined the game and the discussions are everywhere about stocks (Bit coin supporting the discussions and beating stocks at many places)
  3. Front page ads for investments and all headlines leading to new tops in the market.
  4. Future targets are predicted with huge (Over)confidence (Sensex target is 100000, i.e. one lakh only 3 times from now)
  5. Every day you heard new stories of making money in stocks and people sharing their technical skills, trend analysis etc. (Friends telling me how they invested in stocks as well in bitcoin and telling me all about trend analysis. They have never heard of Graham Twitter and what’s app is their graham.)
  6. Bears have lost all hopes.
  7. There is large list of IPO’s like below
Year No. of IPOs Amount Raised
(In Rs Cr)
Issue Succeeded Issue Failed
2007 108 33,946.22 104 4
2008 39 18,339.92 36 3
2009 22 19,306.58 21 1
2010 66 36,362.18 64 2
2011 40 6,043.57 37 3
2012 13 6,770.17 11 2
2013 5 1,283.95 3 2
2014 7 1,200.94 5 2
2015 21 11,362.30 21 0
2016 27 26,372.48 26 1
2017 * 34 62,019.40 34 0

The beauty of stock market is there is a buyer and a seller.

At this valuation too there are buyers and there are sellers. Only time will time who was right.

Till then enjoy the beauty.



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