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Showing posts with label Market View. Show all posts
Showing posts with label Market View. Show all posts

Monday 23 June 2014

End of the "hope rally". Focus back on fundamentals.

Last month, India may have witnessed a watershed moment in its history. The reason I say may, is because, only time will tell if it really was such a moment, or it was another great opportunity lost. Expectedly the markets rallied as the results poured in. All the common reasons were offered - Modi has a single majority so he can fix all the problems of the economy, India will push forward with its reform agenda, industrialization and fix governance.

So, the "easy" money based on the hope of "acche din" played out. During the hope rally, everything that a "India development" story went up - mining, power, infra, cement - almost everything. A lot of the PE re-rating for mid caps took place. It removed the glaring cheapness of most of the "good" midcaps. 

With the obvious cheap stocks now becoming well priced, we are back to the grind of making money on the fundamental basis. So, it is critical to focus back on individual companies and how they can perform and grow in the next few years. 

It is obvious that there are no easy answers (from Modi or anyone) of India's challenges. Inflation is stubbornly high and so are subsidies. Any reduction in subsidies (oil, LPG, fertilizers, rail fare etc) without a commensurate increase in efficiency is likely to increase inflation even higher. There is no magic wand that the PM has to fix the Indian economy. Once people start realizing that, markets are likely to correct or stagnate at the very least. And provide an opportunity for patient investors to buy into. The trick is to be prepared with a buy list and cash when (& if) that happens.

Monday 18 March 2013

Sensex Rolling Retuns - Some observations

I was doing some data analysis on Sensex data from BSE. I have taken the Sensex value for March end (or very close to it) for every year since Sensex was constituted in 1979. It put my mind to rest on the need to keep focussed on the long term and ignore short term market gyrations.

Some interesting observations:-
  1. The worst crash in Sensex came not in 2008 but in 1993 courtesy Harshad Mehta. Down 45% in 1993 vs 35% in 2009.
  2. The highest return for a year has been 252% in 1992!!! Again, courtesy Harshad bhai. The man giveth and he taketh away!!!
  3. So, between 1992 & 1993, investors actually did not lose a lot money if they had stayed invested. Sensex was down 10% over the 2 year period, not a catastrophe.
  4. Negative returns for over rolling 5 years starts to become lower and lower and by 12 years, it becomes zero. i.e, there has been no case historically, where an investor has lost money by being invested for 12 years or more.
  5. For a period of 3 years or more, the median return is relatively good - 14% or more.


Summary of Observations

Returns (%)
Date
Sensex
1 Year
3 Years
5 Years
7 Years
10 Years
12 Years
15 Years
Apr-79
124







Apr-80
129
3.92






Apr-81
173
34.47






Apr-82
221
27.34
21.18





Apr-83
213
-3.76
18.12





Apr-84
247
16.06
12.46
14.73




Apr-85
353
43.05
16.91
22.30




Apr-86
582
64.91
39.90
27.40
24.70



Apr-87
524
-9.92
28.56
18.87
22.18



Mar-88
398
-24.03
4.11
13.38
12.61



Apr-89
724
81.71
7.53
24.01
18.48
19.28


Apr-90
783
8.16
14.30
17.27
20.47
19.76


Apr-91
1203
53.63
44.54
15.62
25.39
21.37
20.83

Apr-92
4238
252.34
80.24
51.88
42.63
34.37
33.78

Apr-93
2311
-45.46
43.45
42.14
21.77
26.95
24.08

Mar-94
3779
63.49
46.46
39.17
32.60
31.37
26.70
25.57
Apr-95
3317
-12.23
-7.85
33.47
35.36
25.11
25.73
24.17
Apr-96
3418
3.04
13.92
23.23
24.82
19.36
24.49
21.98
Apr-97
3558
4.10
-1.99
-3.44
24.14
21.10
21.23
20.35
Apr-98
4072
14.46
7.08
11.99
19.03
26.17
17.60
21.75
Apr-99
3686
-9.47
2.55
-0.50
-1.97
17.68
17.65
19.75
Apr-00
5053
37.07
12.41
8.79
11.82
20.50
23.58
19.41
Apr-01
3605
-28.66
-3.98
1.07
-0.67
11.60
14.32
12.92
Apr-02
3463
-3.94
-2.06
-0.54
0.62
-2.00
13.19
13.41
Apr-03
3151
-9.00
-14.56
-5.00
-1.15
3.15
8.36
14.78
Apr-04
5788
83.68
17.10
9.44
7.20
4.36
2.63
14.87
Apr-05
6605
14.11
24.02
5.50
7.15
7.13
9.14
15.28
Apr-06
11564
75.08
54.25
26.25
17.74
12.96
9.77
16.29
Apr-07
12625
9.17
29.69
29.52
13.98
13.50
11.78
7.55
Apr-08
15833
25.41
33.83
38.11
23.54
14.54
13.63
13.69
Apr-09
10349
-34.64
-3.63
12.32
16.93
10.87
9.31
6.95
Apr-10
17693
70.96
11.91
21.78
27.95
13.35
13.02
11.81
Apr-11
19420
9.77
7.05
10.92
18.88
18.34
14.85
12.28
Apr-12
17597
-9.39
19.36
6.87
15.03
17.65
10.96
11.25
Mar-13
19570
11.21
3.42
4.33
7.81
20.04
15.14
11.03
Yearly Rolling Returns

34
32
30
28
25
23
20
Negative Returns

11
6
4
3
1
0
0


Summary since 03 Apr 1979


1 Year
3 Years
5 Years
7 Years
10 Years
12 Years
15 Years

Yearly Rolling Return Observations
34
32
30
28
25
23
20

Negative Return Observations
11
6
4
3
1
0
0

Loss Probability (%)
32
19
13
11
4
NIL
NIL

Median Return (%)
10
14
15
19
18
15
15

Average Return (%)
24
18
17
17
17
17
16

Max Return (%)
252
80
52
43
34
34
26

Minimum Return (%)
-45
-15
-5
-2
-2
3
7

Standard Deviation (%)
53
20
14
11
9
7
5