Team-BHP > Shifting gears


View Poll Results: Stocks as a percentage of my net assets are -
0 - 25% -- I'm like the most conservative Indians. I love FDs. 396 32.27%
26 - 50% -- I have a few stocks. 549 44.74%
51 - 75% -- I'm an active trader. 201 16.38%
76 - 100% -- Hey, I'm an i-banker!!! 81 6.60%
Voters: 1227. You may not vote on this poll

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Old 31st July 2019, 12:48   #4051
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Re: Do you play the stock market

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Originally Posted by SmartCat View Post
If you have zero debt allocation, then sell off 25% of your equity portfolio and move it to govt bond funds. At the end of each month, see where the equity:debt ratio stands. As mentioned in the previous post, buy the asset (equity or bonds) that falls below the set percentage (75% for equity, 25% for govt bond funds)

Before you jump in, do some google research (keyword: stocks bonds ratio) on this topic. Because bonds move up and down in value everyday, just like stocks. However, your returns are guaranteed by Government of India if you hold for a certain duration. Still, understand what is happening before you invest in government bond funds.
I have invested in dynamic bond funds earlier but never in government bonds. Given the current debt scenario, I think long-term govt bond funds (Gilt funds) make more sense.

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Originally Posted by carboy View Post
The first debt allocation to be done by anyone should be PPF - max out the 1.5 Lakhs per year first thing each year before going for any other debt instrument in that year. PPF is the only Exempt-Exempt-Exempt Debt Instrument available in India
Thanks but I would like to have liquidity with my investment, particularly debt. Also, returns are not that high.
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Old 31st July 2019, 13:25   #4052
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Re: Do you play the stock market

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Originally Posted by Simhi View Post
What about EPF? I thought EPF is also EEE.
Yes, but it's not available to everyone unlike PPF.
Quote:
Originally Posted by adimicra View Post
Also, returns are not that high.
Considering the tax treatment, the returns are higher than most other debt.

Last edited by carboy : 31st July 2019 at 13:27.
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Old 31st July 2019, 22:50   #4053
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Re: Do you play the stock market

Broadly I agree with you. However one cant blindly say I am long term investor and wait. If there are corporate governance related issues, it would be better to get out right away. Dont give more importance to the fall/rise in stock price. Look at management quality, business quality, quarterly numbers and earnings visibility.
Also, IMO one has to be market cap agnostic. You will find good/bad companies everywhere.

Quote:
Originally Posted by SmartCat View Post
Almost all half-decent smallcaps and midcaps will eventually hit all time highs. That is, as long as they do not have too much debt. Money that is rushing out of mid and smallcaps will eventually rush back in. It is the "circle of stock market life" . If past is any indication, it takes 3 to 5 years for stocks in small/midcaps to come out of a bear market. If we assume that small/midcap bear market started in early 2018, we have another couple of years of disinterest from investors.

If fall in prices is bothering you, just don't login to your brokerage account. Check back after a few years. If you bought a 40 x 60 sq ft piece of land near Hyderabad ORR, do you go to local real estate broker everyday and ask what is the selling price? Or do you come back after 5 years and then see what price you can sell your investment for? Remember that stocks are not just random numbers that go up and down. They are assets/ investments - just like real estate. You have to treat it as such.
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Old 10th August 2019, 19:38   #4054
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Re: Do you play the stock market

NRI investors: What is the simplest way to continue investments in the Indian stock market?

I have a demat account (let's call it resident) with FundsIndia and they say that I have to 'convert' to a non-resident account and are referring to getting a PINS account. I believe this is only if I wish to invest further - the existing stocks in portfolio do not need this PINS account. I could be wrong.

PINS letter shall be issued by HDFC and there are two cases here as well:
1. PINS - NRE (I can invest foreign income into Indian stocks)
2. PINS - NRO (I can invest my Indian earnings into Indian stocks)


FundsIndia says:
Delivery brokerage is 0.3% on the total transaction volume in a day

For PINS account, HDFC has charges of Rs. 1000 (one-time) + Rs. 1000 (annual). I have to pay this twice if I need both PINS-NRE and PINS-NRO.
In addition each share purchase/ sell has charges of about Rs. 200-300.
Do you play the stock market-hdfc-charges.jpg

Last edited by S_U_N : 10th August 2019 at 19:42.
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Old 12th August 2019, 12:36   #4055
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Re: Do you play the stock market

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EVs replacing fossil fuel powered cars - not sure if the market is pricing it in. Reliance Industries stock has not been affected.

Personally, I think EVs replacing fossil powered vehicles in the next decade is all noise. If it was really the case, RIL/IOC/BPCL/HPCL wouldn't be investing tens of thousands of crores in increasing refining capacity. Just do a Google search for "<refiner name> expansion" and you will get an idea.
Came across this news and recalled our earlier discussion.

Reliance diversified big time with Jio, thereby reducing their reliance on Petroleum division. Now that they are No 1 service providers in India and No 2 in the world, this news comes in simultaneously

Quote:
Reliance Industries Ltd. plans to produce only jet fuel and petrochemicals at its Jamnagar refinery in Gujarat, as part of its oil-to-chemicals strategy that will eliminate most fuels it produces in favour of high-value products.

RIL wants to make its Jamnagar refinery future-ready as fuel demand patterns undergo changes with the advent of electric vehicles.
Souce:
https://www.bloombergquint.com/busin...nagar-refinery
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Old 14th August 2019, 08:49   #4056
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The market is behaving rather abominably these days.
Most of the Mutual Funds and Stocks and so on have taken a solid beating.
Many people's corpus funds have eroded a great deal.
Property prices which were anyway inflated are in a serious mess with builders sitting on inventory. The Auto industry is also in a mess.
Rather Doomsday ish it looks like.

But as with all things cyclical, there will be an upsurge some day hopefully soon.

Its a good time to invest at this moment!
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Old 14th August 2019, 09:46   #4057
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Re: Are most of us living on the edge? Let's talk about income, expenses & savings

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Its a good time to invest at this moment!
Market is not really down much. The Nifty Index Level is more or the same it was in March 2019 - I mean no one considered that the Market was down in March, did they? The Nifty P/E is around 27 which is still high & considered overvalued (though a little lower than a couple of months back at 29).
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Old 14th August 2019, 10:19   #4058
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There is a market beyond Nifty which is bleeding for the last 1.5 years. Check how much the midcap and smallcap indices are down from their lifetime highs innJan 2018
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Old 14th August 2019, 10:27   #4059
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Re: Do you play the stock market

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Originally Posted by carboy View Post
Market is not really down much. The Nifty Index Level is more or the same it was in March 2019 - I mean no one considered that the Market was down in March, did they? The Nifty P/E is around 27 which is still high & considered overvalued (though a little lower than a couple of months back at 29).
Quote:
Originally Posted by adimicra View Post
There is a market beyond Nifty which is bleeding for the last 1.5 years. Check how much the midcap and smallcap indices are down from their lifetime highs innJan 2018
Two things to remember when we talk about Nifty PE:

1) Nifty PE data by NSE is wrong. It considers only the standalone EPS. When we consider the results of all subsidiaries (consolidated results), current Nifty PE is 22. You can get the true Nifty PE on this link (scroll down to the bottom):
https://www.equitymaster.com/india-m...source=submenu

2) Nifty PE is artificially high because of poor banking results (all those NPAs). But from this financial year, banking results will be more or less "normal". Just look at 1QFY20 results of ICICI Bank, Axis Bank, BoB etc. Basically, by the end of this financial year, Nifty PE will be 17 or 18 if index stays where it is.

Since Nifty PE ratio as an indicator of market valuations is not reliable, we could look at current Nifty PBV (price to book value) ratio or Nifty dividend yield and compare it with market peaks of year 2000 and 2008.

Bookmark this site: https://nifty-pe-ratio.com/

Do you play the stock market-niftypbv.jpg

Current Nifty PBV ratio: 3.41
2007 peak Nifty PBV ratio: 6.23
2000 peak Nifty PBV ratio: 4.89

Current Nifty dividend yield: 1.35%
2007 peak Nifty dividend yield: 0.88%
2000 peak Nifty dividend yield: 0.92%

Last edited by SmartCat : 14th August 2019 at 10:35.
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Old 14th August 2019, 10:34   #4060
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Re: Do you play the stock market

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Originally Posted by SmartCat View Post
1) Nifty PE data by NSE is wrong. It considers only the standalone EPS. When we consider the results of all subsidiaries (consolidated results), current Nifty PE is 22.
This isn't something new, right? I mean Nifty P/E has always meant the standalone P/E. When we compare it to the peak Nifty P/Es before the 2008 crash etc, that P/E was also standalone P/E


Quote:
Originally Posted by SmartCat View Post
Since Nifty PE ratio as an indicator of market valuations is not reliable, we could look at current Nifty PBV (price to book value) ratio or Nifty dividend yield and compare it with market peaks of year 2000 and 2008.
What reason makes P/E unreliable but P/B reliable?

Last edited by carboy : 14th August 2019 at 10:41.
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Old 14th August 2019, 10:41   #4061
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Re: Do you play the stock market

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This isn't something new, right? I mean Nifty P/E has always meant the standalone P/E. When we compare it to the peak Nifty P/Es before the 2008 crash etc, that P/E was also standalone P/E
Sure, but index constituents keep changing. More index companies now have subsidiaries than in 2000 and 2008. Examples:

- Bajaj Finserv owns Bajaj Finance
- Bharti Airtel ownes Bharti Infratel
- Grasim owns ultratech cement
- ONGC owns HPCL
- Tata motors owns JLR
- M&M owns Tech Mahindra/M&M Fin/Mahindra Lifespace etc

and so on.

Quote:
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What reason makes P/E unreliable but P/B reliable?
Let's say a bank made a profit of Rs. 1,000 cr last year and Rs. 10 cr this year (because of NPAs). But since PE ratio number depends on last 4 quarters EPS, that particular bank's PE ratio could show an insane number (like 250). But when a bank or any other company's profits fall 99%, the networth does not change much. In the above example, P/BV remains stable. That's why when looking at an index level, PBV makes more sense right now.

Last edited by SmartCat : 14th August 2019 at 10:52.
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Old 14th August 2019, 11:41   #4062
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Re: Do you play the stock market

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Originally Posted by SmartCat View Post
Sure, but index constituents keep changing. More index companies now have subsidiaries than in 2000 and 2008. Examples:

- Bajaj Finserv owns Bajaj Finance
- Bharti Airtel ownes Bharti Infratel
- Grasim owns ultratech cement
- ONGC owns HPCL
- Tata motors owns JLR
- M&M owns Tech Mahindra/M&M Fin/Mahindra Lifespace etc

and so on.
Both Bajaj Finserv & Bajaj Finance are part of the Nifty 50. Both Grasim & Ultratech are part of the Nifty 50. Both M & M and Tech Mahindra are part of the Nifty 50. So does it make that much of a difference?

Quote:
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Let's say a bank
P/B is a better metric to check valuations for Financial companies & P/E is better for the others. But Financial companies form only 20% of the Nifty 50 (10 out of 50 companies), so I am not sure if checking only P/B makes sense.


In the end, the intrinsic value of a stock is the future cash flows of the company discounted back to it's present value. Are we seeing so much growth in the FCF in the future to justify the high P/Es?


Quote:
Originally Posted by adimicra View Post
There is a market beyond Nifty which is bleeding for the last 1.5 years. Check how much the midcap and smallcap indices are down from their lifetime highs innJan 2018
The Nifty 500 P/E was around 32 in Jan 2018. It's around 29 now. That's a 13% drop - yeah it's more than the Nifty 50 drop but not that big. The main reason is because these companies haven't really grown much in the last 3-4 years. There was very little to justify the Jan 2018 prices. So it dropped, but it's not really undervalued as of now.

Last edited by carboy : 14th August 2019 at 11:54.
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Old 14th August 2019, 11:51   #4063
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Re: Do you play the stock market

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In the end, the intrinsic value of a stock is the future cash flows of the company discounted back to it's present value. Are we seeing so much growth in the FCF in the future to justify the high P/Es?
I do not bother predicting the future earnings of a company. As long as current valuations (based on PE ratio, PBV ratio and dividend yield) of a stock is reasonable, I buy.

But yeah - going by the news flow, things look bearish for the markets. Bosch India MD says slowdown in automobile sector is structural, and not cyclical.

Do you play the stock market-img20190813wa0039.jpg

Quote:
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P/B is a better metric to check valuations for Financial companies & P/E is better for the others.
PBV is an useful metric for valuing any company whose earnings are unstable (Eg: commodities)

Last edited by SmartCat : 14th August 2019 at 11:56.
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Old 14th August 2019, 12:25   #4064
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Re: Do you play the stock market

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P/B is a better metric to check valuations for Financial companies & P/E is better for the others.
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Originally Posted by SmartCat View Post

PBV is an useful metric for valuing any company whose earnings are unstable (Eg: commodities)
PBV is among the most important criteria which I use to for PSU banks.
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Old 14th August 2019, 13:00   #4065
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Re: Do you play the stock market

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PBV is among the most important criteria which I use to for PSU banks.
Avoid buying PSU banks till the management decides to pay dividends to shareholders. Restarting dividends implies there will be no more surprises in the future.
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