Nikhil Singh Sumal throws light on the financial standing of the markets in present scenario
“Indian financial markets have undergone a drastic change and there are various factors which have affected it,” says Sumal.
The financial markets are unruly, complicated and unpredictable, especially the stock markets, and it is not possible for a common man to understand its workings thoroughly as only someone well versed with the subject can enlighten us about it in depth. “The sensex has hit a high and retail investors should be extra cautious and should stay away from investing in the current scenario where the stock prices are at their all-time high,” says Sumal, who has been observing the markets from close quarters and is well versed with its workings. He says that retail investors and mutual funds are the main cause behind the ongoing bull rally, which is forming a false scenario where there are possibilities of investors getting trapped once they put in their money at high stakes.
According to him if you compare the current markets with GDP, it stands at 104%, whereas in 2008, when the markets crashed big time, the GDP was at 103%, it only denotes that the markets are overvalued as whenever it goes above 75%, it is considered to be above the head. Secondly, if the PE goes above 20-30 , it is considered to be overvalued, but presently it is at 35-40, which gives a clear indication of the upcoming stormy weather. However, he adds that though the markets seem to be at an all-time high, it doesn’t mean it will crash now or at a later date, but things are a big unpredictable and one should be extremely cautious under present circumstances.
Correction is bound to happen as there has been a bull run since almost past year and experts believe there are 50-50 chances of correction or crash, but the irony is that many investors have lost booking profits due to the huge amounts of confusion the markets have created, says Sumal. According to his observations, if we include the markets with GDP it is at 150% in comparison to USA’s Dow Jones markets. What exactly are the reasons behind the bull run is literally unknown. One of the major reasons could be that after the lock-down, with businesses catching up pace again, new investors are entering the markets as well as foreign investors are pumping in their investments too, which is leading the markets to inflate. One of the biggest contributors is the Indian economy, which is growing stronger owing to its expansive reach.
The question that arises in the minds of many retail investors is that whether they should keep invested or pull out from the markets? Sumal says that it is advisable to keep holding your investments and if the market falls then investors should try averaging their portfolio. “The Indian economy is quite strong and there would not be a major fall unless foreign investments are not pulled off, so hold on, sit tight, and look for the right opportunities to strike gold,” concludes Sumal.
