What To Do With Your Investment?: Friends, you all must have seen how the market is making all time high everyday. Indian market and all time high. Why is this happening? If you tell the simple answer to this in one line, then a lot of foreign money is being spent in India. Foreign Institutional Investors have been investing heavily in India for the last few months, so a lot of new money is being pumped in. The shares are the same, so the demand for those shares is increasing.
The bid on them is looking expensive, so the price is increasing. But why? So many foreign institutional investors or foreign money has become interested in India? What has happened? What is the problem or why the money from outside will not be attracted? Why is India’s market at an all time high? Can it increase further? What action should you take? Is there a risk of falling? should you leave We are going to give you the answers to all these things in today’s article.
Table of Contents
Reason Why the Market is at an All Time High
The first reason has a large population which is young. Now young means he still has his earning years ahead of him. Now that he is young, he is going to remain fit for many years, so there will not be a huge medical burden on the country.
The second reason is also educated. Now he is educated means he is also ready to earn. Educated is also ready to work and if he does a good job then he will also become a good consumer. If they earn, then they can buy many things, that is, they are ready for consumption too, so India has Dual Advantage. If you invest here, you will get educated working employees who are young and can work for many years and secondly, if there is a lot of population, then they can also become very good consumers.
Apart from this, which was not there in India 20 years ago in 19th century, now there is such a thing, that is infrastructure. Now because we are maturing for so many years, we have improved the connectivity of railways in the last 20 years. We have improved the infrastructure roads be it telecom, internet. Now in India, after getting all the things together, it has started creating a golden moment where suddenly many people feel this and foreign money feels this way.
But this is a theory and the world now feels that because it has infrastructure and young population, India always had it. There was always a lot of population, but that population is now getting the support of education, infrastructure and digital penetration, so you are all those factors that will bring growth.
Apart from this there is one more factor. In the last 20 years, there has been political stability at the center level in India, so from 2004 to 2014 the UPI government made it stable, what was the problem in that, what was not. Let us not discuss that in both the governments, but there was only one government, so there was an alignment of vision. It was not that every two years the government is falling and the priority is changing.
Similarly, there is one government from 2014 to 2024, there are good and bad in both governments, but there is clarity of vision which is investing money, whether someone is investing money to set up a big factory for a factory, then he knows that this is going to be the priority for the next five years. This is going to be the policy. Governments used to fall every six months, two years throughout the year, like in the 19th. By the way, if governments are not falling, even foreign money gets confidence that we can remain investors, so due to all these regions, a lot of money is being invested in India. But why is it happening now?
Why FIIs Are So Eager To Invest In The Indian Market?
Why did this factor apply in the last three months, four months, six months? So it has been a long time that you people have been saying that it is 20 years. Now here comes the problem. These foreign institutional investors are very opportunistic. He is not a relative of anyone. Today they are liking India so they are investing money in India. Tomorrow, if Brazil, South Africa or any other country of the world seems better than India, immediately withdraw all the money and invest it there, then it is very opportunistic.
So, this factor has been there in India for three to four months, it is not that it has been there for a long time, but foreign money may not be getting any better alternative than India. Where they were investing money six months ago, if there is any problem, if there is political stability, then they withdraw money from there and immediately shift here. Now if it is so Opportunistic then it can shift from India also(What To Do With Your Investment?).
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Reasons Why FIIs Selling In Indian Market
Now let us understand the reasons for which they can shift from India:
First region instability: These people do not like political stability or any kind of instability at all. If this happens then they can come out.
Secondly, they get a good opportunity from India, and if the market of another emerging market improves by 40 to 50 percent without any concrete reason, then they will start seeing more value in the market. If they start seeing cheap bargains there, then these people will immediately go there.
Apart from this, if our market becomes too expensive, then these people become conscious that most of their investments are Algo Based. When the alarm rang in the machine that went above it, get out, get out, get out, then all of them start following each other. So if the valuation increases a lot, then it is visible on their systems that the risk has increased, so they leave for risk control.
Now here in this two regions are not under our control. What happens when it is an election year? Don’t know which government wants foreign money. A full government comes, a coalition comes. Institutional investors also do not like this mixed government, because if political stability comes then the election result is not in your and my hands. We can’t even guess that. It is not in our hands if any other country becomes very attractive(What To Do With Your Investment?).
Calculating the Valuation of Indian Market
Thirdly, we can take a look at the valuation of our country’s markets. So let’s go, right now we have Nifty’s PE around 23. Almost 23 is now historically it is believed that 18 to 23 or even 24 is normal level. If p below 18, if the market falls and becomes less than 18 then the market is cheap. It’s a good time to invest. This is a criteria, it is blind, it is not to be followed. We are not giving you advice to withdraw and invest money here. We are telling you here how the valuation of the market is analysed?
How is it understood what to do with your money? You can get its framework, its mental model. To educate that, we are giving you this article, then you do not have to use the first criteria and any other criteria independently. Everyone has to use it together. We will tell you all the criteria and then with the help of these criteria, you have to try to reach an opinion, then the ratio which is now, it is generally believed that if it is between 18 to 23 then it is fine. Market is fair value.
It’s 22.5 right now. Every day it’s up and down a little bit. Right now it’s around 22.5. That is, the market is not very expensive right now. Yes it is in the upper range of 18 to 23, but it is not at all overvalued. So this criteria set list i am not getting any alarm signal(What To Do With Your Investment?).
The Buffett Indicator Valuation Model
Second, it is also called Buffett Criteria by many people. This market cap to GDP ratio. It tells us to compare that what is the market cap of all the listed companies in India, then compare their market cap. This is the ratio with the GDP of that country, isn’t it? It is currently around 96 to 97 percent and the formula tells us that when it goes above 100 i.e. when the market cap of all the listed companies in India exceeds the GDP of India, then the market is overvalued, so it is currently around 96 or 97 which is close to that range but still not beyond the range. So, it is not at all like this that alarm bells start ringing. Now we come to the third criteria.
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Know About Valuation Through Mutual Funds
It is not industry standard so it is very personal so it is up to you to believe it or not, it is totally your own decision. But we feel that when mutual funds stop taking fresh long investments, it is a sign that the market is expensive, their business is to take people’s money and manage it. The more money they take from you, the more fees they will get, so it is in their interest to manage as much money as possible. In such a situation, when a mutual fund is stopping taking new investments, it means that it is really finding it difficult to find good stocks.
He is finding it very difficult where to invest the money. Now here we will praise the fund house. Tata is the fund house which stopped fresh investment in one of its schemes and kept telling people because of these small things, not out of greed. One way can also be that the market is at an all-time high, so the greed is that the market is growing a lot. what are you missing out on?
Do it like this and take more money. But there is also a way that the money that is coming in and the retail investors are ready to give more money when the market is high, isn’t it? So this is a very good time to earn more. At that time, stopping this greed and saying that at the current valuation of the market, we are not seeing opportunities to invest good money. We are not able to deploy money properly, so now we will not take new money. Long term approach is also needed, courage is also needed, self lessons are also needed but when they start making funds(What To Do With Your Investment?).
Three to four years ago also once a fund did this. It is a sign for me that the market is getting expensive now. Going by the first two criteria, I don’t think the market is very expensive, a little expensive, not very expensive. Going by the criteria that a fund house is finding it difficult to find new stocks, then yes, I think the market is getting expensive. Infact in our research house also we see that it is difficult, not as easy as before to find new undervalued stocks.
So personal experience also says the same, so now I am saying that I find it mild, a little bit, not too alarming, expensive, so what does it mean? What should you do in this market now? Coming to the point. Should you exit or should you stay invested?
Is the Market Overvalued? Do this!
Let me tell you a simple news story, it is from the US market, but this news report is also true in India. If you read, it tells that in the last 20 years, the US market has given a return of six and a half percent. India gave much more than this, but the data is from there. Has given a return of 6.7% in the last 20 years. Out of this six and a half percent, Sara’s entire six and a half percent return has come in only 20 best days. So if someone had withdrawn his money in those 20 best days, his return would have been zero, which would have been zero for 20 years. If you don’t stay in that market for 20 days. What do we learn from this, from this we learn a very important thing that we should not withdraw our money from the market. I need that money in the short term.
If I had invested that money. Don’t withdraw that money today thinking that I will keep it for 10 years or thinking that I will keep it for 20 years. Thinking that the market has fallen. Yes, if you need that money today, in a year or two, then you must withdraw it. When the market is expensive, long term money should not be withdrawn today.
Because if you miss even two to four good days, you will miss a lot of returns over the long run. So market timing should not be tried at all. And what’s it’s P/E? What is this market cap to GDP ratio? It also goes to P/E 30? If it goes from 30 to 32 also, then if we see from that point of view, then the market can increase by 20 to 25 percent from here. This market cap to GDP ratio also goes up to 120, so from here again the maximum can increase by 25% according to that ratio, then the market is going to be a bit expensive, but it is not very expensive(What To Do With Your Investment?).
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It can go to 80,000, it can also go to 85,000. We are not telling you here by guessing. But there are two things. If you need money in a year, six months or two years, then you can think of withdrawing some money. It is your call but you can think because it is important to be extra safe with the money you need in the short term. Money you don’t need for the next five years. Forget what the market is doing, what it is not doing. No need to think too much. Your money is invested in the Indian market and there is very little good use of your money from the Indian market. Yes, you pick stocks independently, so you definitely have to analyse. How is your stock, how is it not?
I am talking about general overall. Can the market fall from here? Maybe you stay invested and a question comes, should I do profit booking? This is the time for profit booking. What if the market crashes from here? So look, the market can always fall, can’t it? If you are in this market, then you are taking this risk in your mind that the market can fall anytime. And if this risk is not letting you sleep then you should not be in this market at all. You should leave. Is the market now in all time high, then you have increased fear, then your brain is answering you that you should leave.
If you are not panicking. If you know that it is okay, you have gone back from here to 55,000, haven’t you? I need it after five years, if no trouble is going to come on me, then don’t leave.
Should You Worry About The Market Valuation?
Will the market go up or down? We can’t say anything about it. We will definitely tell you one thing that as this Ratio, the alarm in it, which we told you, in it, goes close to the market or goes beyond it, the probability of the market falling increases and the cheaper the market, The probability of its growth increases. Now, the probability of which is less, it cannot happen, it is not so.
So we can tell you the probability that if these indicators are saying that the market is expensive then the probability of its growth is less, but still it can grow and if the market is very cheap then the probability of its growth is high. Now even if the market falls and your goals are long term, the probability is high that the market is looking very expensive. There is a probability that even if the market will fall, you should not withdraw your invested money. Yes, you can keep the money that you already have, that you want to invest, that you will not make a new investment for six months. Don’t withdraw the invested money from the market unless there is an emergency(What to do with your investment?).
If you are going to have any big expenses in the next one or two years, then now is the time that you can withdraw that money. But with the thought that 75,000 has become 80,000 because maybe then you will not blame yourself and you will not feel sad. If you have taken a decision after thinking about it or will you follow it, then you and I have to take care of one thing. If we are not panicking and do not need money immediately, then we have to stay invested. If our goals are long term then we have to stay invested. What to do with all the new money. If you want to put a huge amount, you can put it on hold.
Keeping SIP continuous is that if you have a lifetime income of ₹ 1 crore, you get retirement fund, then 1 crore should be put today in one go. The market is not worth it, your regular investments can continue.
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Conclusion : What To Do With Your Investment?
Friends, in today’s post, we have told you what to do with your investment? When the market is always high. If you like the information, then do share it and turn on the notification of the website for such investment-related updates and friends, here we are not asking you to invest, this post is just for giving you information, so Whenever you think about investment, you must take advice from a good investor.
Thank you.
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