Monday, October 11, 2010
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.