Winning Stokes

The markets have been rising (or getting pumped up) since the announcement of the Budget FY22. The BSE Sensex is now trading at 50, 408.35 1 up 610.63 points (+1.23%), while the NIFTY50 is now seen at 14,830.65 up 182.80 points (+1.25%). Now the question is why there is such an euphoria in the markets when the P/E of the NIFTY50 is 38.79, PB of 4.15, Dividend of only 1.08% and EPS of only Rs.382.30? Nothing much rationality, expcept media created frenzy. 

I saw a YouTube video where a gentleman was seen explaining why the markets don't look expensive at a P/E of whopping 38.79 taking the case of Ionex Leisure Ltd (Rs.338.45), which is Bizarre, when most sectors except Hotels, Cinema Halls and Railways continued to function in full swing from the 3rd quarter FY 21 and earning can't move in such a rapid fashion to cover a P/E as high as Rs. 38 - plus. Hence, the truth is that at the current price, the domestic bourses are extremely overvalued and could collapse at any time. 

2ndly, the Covid-19 pandemic has pulled down the inflation during the last year, but with a low base we could see huge inflation figures this year, which might force RBI to raise interest (Repo) rates; putting all the assumptions of an expansionary policy to drain. 

Hence, I would suggest all to exit out of all open positions and sit with cash, waiting for the heat to settle down. 

Botomline: With so much money around we may soon see the inflation figures swelling up. 

Photo: Cashmaster