Anish K Gupta Profile picture
Apr 29, 2022 11 tweets 7 min read Read on X
Let’s understand if Indian Markets are currently overvalued or undervalued. A Thread 🧵

#macroeconomics #economy #India #MSCI #Nifty #SP500

@SahilKapoor @ankitapathak_ @avasthiniranjan @WeekendInvestng @virtual_kg @564pankaj @JustPunforfun @JustNifty @raggy_k @pprao
For this we need to understand P/E ratio. It basically tells us the number of years at constant profits it will take to return the investment.
It tends to capture the agony and ecstasy of the market.
In bear phase investors are despondent about the future, P/E ratios of companies and indices will contract. Exactly opposite happens in bull phase.
Forward PE Ratio:
It is a version of the P/E ratio that uses forecasted earnings for the P/E calculation.
The earnings used in this formula are just an estimate and not as reliable as current or historical earnings data
Present Nifty PE is 22.2

Forward P/E ratio is 19 - 20x; which is close to its historical average P/E of 19.
The valuations of India's equity market have fallen this year.

Nifty 50 index saw its highest P/E ratio ~ 40x in Feb-Mar’21.
Many Fund houses like Goldman Sachs say they prefers EMs like Mexico over India for investments; due to still lofty valuations seen in the Indian markets.

MSCI World's valuation multiple of 17.7 times one-year forward PE

MSCI EM is at 11.91 times.

Infogrpahic @yardeni
S&P500, forward 12-month P/E for the index is around 18.5x nearly same as 5Y average of 18.6x and lower than the highs of last year (P/E of 45.89 seen in July 2021)


S&P highest P/E - 123.73 in May 2009; and lowest 5.31 in Dec, 1917.
P/E for two indices: Nifty 50 and S&P 500, the forward PE multiple is extremely similar.
Both have come off from their stretched levels of last year and are now trading closer to their historical averages.
After figure, and end statement from MSCI in next tweet
Forecasters are trimming their growth expectations amid uncomfortable inflation numbers
Outlook on exports is unclear; liquidity is expected to reduce as RBI continues on withdrawal track.
Global sentiment is turning hostile from a demand, liquidity and prices standpoint
Valuations of Indian markets have fallen of late but still trade at a premium to MSCI EM.
Uncertainties exist due to headwinds like war, inflation, interest rates, possibilities of carry trade unwinding (reflected in FII outflow numbers) and supply disruption.

End

RT/Like/Fwd
This may be considered a good time to invest for long term goals over next 2 years, if you are ready to bear short term pain. Keep on doing SIP and buying your fav blue chip stocks.

For short term / medium term goals I would not advise to invest any money in equity

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More from @optionurol

May 22, 2022
@indiacharts @_prashantnair I totally agree. The inflation trajectory may change, not final outcome of inflation.

The projected May 2022 CPI inflation is between 6.5%-7%.

How the fiscal cost of this relief is absorbed, need to be seen.
@indiacharts @_prashantnair The most welcome step is decreasing input cost on raw materials, plastic and steel.

This will help the industry majorly. Something which is need of the hour.

Now we have to see how much supply chain disruptions affect this import.
@indiacharts @_prashantnair War induced commodity price increase have increased inflation estimates worldwide.

IIP growth remained subdued at 1.9% in March compared to an increase of 24.2% a year ago,? on account of the low base effect.
Read 5 tweets
May 22, 2022
Hemline Index (George Taylor, 1925).

Skirt hemlines are higher when the economy is performing better, and longer during downturns.!!!

(Fuming Feminist Economists)
Lipstick Index (Leonard Lauder)

He found that in the backdrop of an uncertainity, people wanted to go shopping but desisted buying expensive items.

So most bought lipsticks.

Post 9/11 his company’s lipstick sales doubled.

With the use of mask lipstick Index lost its value.
Read 10 tweets
May 21, 2022
@bon_laetitia @SamanthaLaDuc

Inflation and Oil. My Take

My take on Oil and Inflation

1. Oil accounts for ~ 4.5% of GDP as you mentioned. At 100$ it was 3% of global GDP.

If 4.5% of global GDP is twice as expensive tomorrow, clearly, this will have some impact on inflation.
2. I don't think it's a major driver when it comes to inflation. Monetary Policy plays a more important role.

3. Oil is pertinent to every factory, hence through may not have volumetric effect but still affects cost of goods.
4. When it comes to oil as a source of energy, depending on where we are, 50-60% of what consumers pay is tax

5.. Temporary spikes upto even $150 are very likely. For every 30$ increase per barrel inflation expected to go up by 0.5% after 6 months.
Read 4 tweets
May 20, 2022
Official Bear Market entry of #SP500. Just about to go 20% from the top
Not all is red.. Specks of green seen.
Done

Will it sustain here?
Read 5 tweets
May 20, 2022
July 2020-March 2021: Rs 99122 Crore
FY 21-22: Rs 30307 Crore

Significantly down
@dugalira @bqprime @RBI @FinMinIndia
Lowest since 2011 - 2012
(Infographic: @bqprime ) Image
Read 5 tweets
May 16, 2022
@SahilKapoor I can probably answer only first question.

1. Oil accounts for approximately 4.5% of GDP as you mentioned. At 100$ it was 3% of global GDP.

If 4.5% of global GDP is twice as expensive tomorrow, clearly, this will have some impact on inflation.

1/n
@SahilKapoor 2. I don't think it's a major driver when it comes to inflation. Monetary Policy plays a more important role.

3. Oil is pertinent to every factory, hence through may not have volumetric effect but still affects cost of goods.

2/n
@SahilKapoor 4. When it comes to oil as a source of energy, depending on where we are, 50-60% of what consumers pay is tax

5.. Temporary spikes upto even $150 are very likely. For every 30$ increase per barrel inflation expected to go up by 0.5% after 6 months.

3/n
Read 6 tweets

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