Data shows Nifty PE is above 15 year average
updated on 21 Sept 2016
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The Nifty50 might be trading above its 15-year average price-to-earnings (P/E) multiple this September, but that should not push traders to go short in this market, which still has some room to go.
The average PE recorded in September in the last 15 years comes at around 18.3 times, which is lower than the current PE of Nifty50 at 23.89 times as of September 12, 2016.
However, analysts still do not advise traders to go short on the index yet, because there is no indication on the charts to suggest that the trend has reversed as long as Nifty50 holds above the 8,600 level.
After witnessing a strong upward move from the lows of 8,540 to around 9,000, the Nifty50 came under selling pressure at higher levels. The consolidation phase could well continue for some more time
Traders can use the opportunity to either accumulate quality stocks on declines or book partial profits, but do not go short at the moment. Even if somebody plans to go short, s/he should follow strict stop loss, a number of investors were waiting for this dip.
Technically, if the Nifty50 follows its broad range channel line pattern, then there are selling opportunities. If the index stays below the 8,750 level, further selling pressure cannot be ruled out.
What should be an ideal portfolio strategy?
The ideal portfolio strategy should be to stay invested and use cash to get into the economy- and consumption-related stocks, which could drive the next leg of the bull run, experts said.
Investors should stay with largecap blue-chip companies, quality midcaps and smallcap stocks. The themes to focus on under the broad categories include FMCG, utility, pharma, NBFCs and automobiles.
The best strategy for equity investing is to get the right sectoral allocation and hold your investment to create value over the medium to long term. Book part-profit in case valuations are seemingly higher
Though at current index level, the market looks overvalued, fund managers are still able to find reasonable ideas to invest from the broader investment perspective with a long-term objective