A few days back, it had started to look like we have missed an opportunity to go long on NIFTY and that this time it might break the all time high. However, that has completely turned around now. Now, time is very bad for Indian investors has they are left with very few options to invest in at the moment.
Hopeless Gold
Gold is now into wave 5 of the decline, so there might be some bullish correction soon, however the outlook remains bearish for gold. The only defense for Indian investors in gold remains the depreciating currency INR which could possible defend against the otherwise huge losses from gold investment. So, this option of investment is close to gone as a defense.
The interest rate outlook remains for an expectation of rate cuts continuing with lowering inflation. However, if you think about equities, all the money that was invested by the FIIs this year is going to be pulled out quickly as the currency expectations remain grim. When that happens equities may continue to decline further. In lack of options, a lot of investment should flow into bonds. This further supports our argument for a rally in bond prices, and our recommendation to buy bonds right now.
PE Ratio story for NIFTY
This is the big picture thing that one should focus on right now. If NIFTY continues to decline, it is going to fall into lower PE levels. Now if we analyze historically, PE levels have ranged from 12-28. Whenever investments were made close to lower levels, they have give very high double digit returns over the next 3 years. So, I would definitely be considering to invest very heavily on equities at those levels. Right now we are sitting and gradually declining from upper 17 level.
For my SIP investments in mutual funds, I'll let them running as I don't like to control the timing of those investments.
Hopeless Gold
Gold is now into wave 5 of the decline, so there might be some bullish correction soon, however the outlook remains bearish for gold. The only defense for Indian investors in gold remains the depreciating currency INR which could possible defend against the otherwise huge losses from gold investment. So, this option of investment is close to gone as a defense.
The interest rate outlook remains for an expectation of rate cuts continuing with lowering inflation. However, if you think about equities, all the money that was invested by the FIIs this year is going to be pulled out quickly as the currency expectations remain grim. When that happens equities may continue to decline further. In lack of options, a lot of investment should flow into bonds. This further supports our argument for a rally in bond prices, and our recommendation to buy bonds right now.
PE Ratio story for NIFTY
This is the big picture thing that one should focus on right now. If NIFTY continues to decline, it is going to fall into lower PE levels. Now if we analyze historically, PE levels have ranged from 12-28. Whenever investments were made close to lower levels, they have give very high double digit returns over the next 3 years. So, I would definitely be considering to invest very heavily on equities at those levels. Right now we are sitting and gradually declining from upper 17 level.
For my SIP investments in mutual funds, I'll let them running as I don't like to control the timing of those investments.
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