Monday, October 11, 2010

Is the Indian Stock Market topping out?

     The Indian Stock Market bench mark Index Sensex has scaled 21150 on January 2008 and it followed by a big crash and by October 2008, it tested a low of 7700, a level achieved in just 10 months. Stock Market crash was followed by economic slow down. The Indian Economy which was growing around 8% at that time, saw a downturn in its GDP growth.

     Now the same Bench mark Index Sensex is trading well near its all time high of 21150. When Sensex was trading in 2008, its PE ratio is 21. It was at that time a high Price to Earnings ratio. Historically when ever Sensex trades above the PE ratio of 20, it tops out.

    Now, with Sensex trading above 20000, already the PE ratio has crossed the 21 mark and it is trading well above that. Fundamentally, a top has to form around this level. Technically speaking, a double top formation is a possibility. Technical and Fundamental indicators point to a top at this level. Sentimentally, euphoria is seen in stock market circles. The continuous flow of FII funds in the market is boosting the sentiment. The bullish sentiment has reached the levels that was seen in January 2008.

    I feel it is the right time to withdraw the funds from stock market. With everything getting saturated, a bullish sentiment alone cannot take the market further. So a correction is going to be there in the near future.

    Protect your capital and don’t get sucked into the crowd. Beware, in stock markets, crowd is always wrong.



1 comment:

  1. tak pandai sangat pasal ni.. tp aku percaya, kaedah dinar emas mampu menyelamatkan inflasi, insyaAllah! http://matahaw.blogspot.com/

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