This year Equities have been an underperformer. Looking at the present valuation of Sensex we think that this is the right time to pick up the right stocks form the markets. The Indian equity market is considered to be one of the best performing assets class for the next 7-10 years. But investors need to careful when they go for bottom fishing of the stocks. They should focus on investing on specific companies rather than investing on sectors as several verticals are looking attractive in the current market meltdown.
At the current valuation the markets are looking safe for investment but the actual pay off of an investor will be as per their stock selection. There are various sectors whose valuation seems to be undervalued but among those sectors picking the right stock of the right companies is important.
The Sensex (BSE) has fallen nearly 18% from 20500 levels which suggests that the markets have sharply corrected from the highs.The price to earnings ratio (P/E ratio) has fallen from the multiples of 26-27 to 14 levels.The average long term PE of Sensex has been multiple of 14.5. So presently we are trading in the undervaluation zone and whether this level is closed to the bottom is a question mark. However if the Sensex tumbles and reaches 10 PE we may say it to be an ultimate bottom.
The characteristics of investment have changed and investors are now focusing more on index movements. Global markets and local market trends are very important before investing in the market.
“Bell the bull says: Select right stock with right value.”