Market Bubble

Nifty rose to an all time high at 7929 on 22^nd august 2014. Unlike last year, the Jackson Hole meeting held between 21- 23^rd August 2014 proved to be a non-event from India’s stand point. US continues to be plagued with challenges of the aftermath of the 2008 recession. As it appears, interest rate shall remain near zero for the foreseeable future due to myriad macro - economic challenges.

In the recent market rally, quite a number of stocks have run up sharply disproportionate to their earnings/fundamentals. The Q1 earnings result for the FY 2014 – 15 is just a case in point. Let’s look at the sample of few companies, their quarterly year on year profit growth and their appreciation in the stock prices. (Appreciation from 3/3/14 to 31/7/14)

Co_Name	Y_o_Y_PAT_Growth	Sh Price Growth
NHPC Ltd	-14.35	27.30%
JP Associates	-124.1	44.32%
Sesa Sterlite	-188.7	66.38%
Tata Motors	-44.02	8.78%
Reliance Power	-83.77	52.77%
Ashok Leyland	-66.17	119.61%
Adani Power	-80.44	57.88%
H P C L	-103.15	47.86%
Adani Enterp.	-100.76	64.38%
B H E L	-58.43	40.35%
DLF	-51.62	42.47%
IDBI Bank	-65.85	58.63%
I O C L	-181.56	32.16%
Cairn India	-67.63	-3.53%

There are at least a dozen more companies that can be added to this catalogue. The objective is not to put these companies in poor light but, to caution investors against falling prey to the current market euphoria.

Whether you’re a direct equity or a Mutual Fund investor, the focal point should be the quality of the stocks.

Happy investing!

Disclaimer: No content on this blog should be construed to be investment advice. You should consult a qualified financial advisor prior to making any actual investment or trading decisions. All information is a point of view, and is for educational and informational use only. The author accepts no liability for any interpretation of articles or comments on this blog being used for actual investments