INDIAN STOCK MARKET TRENDS- NIFTY

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Where do we see Indian stock markets over a period of 3 years from now?

The charts given at the top shows how the PE of NIFTY has over last 6 years. The chart below shows the NIFTY values over the same period

Here are few points that can be dedicated from these charts.

1. Barring few short periods, PE of NIFTY has stayed above 15.
2. Markets have reacted sharply whenever PE has gone above 20.
3. We have seen a dream run over last 2 years.

Now coming to fundamentals

1. NIFTY companies have been performing well over last few years.
2. This leaves very little scope for negative performance in net profits by NIFTY companies in next 2 years. 3. Expect a minimum 15% growth in next 3 years.
4. At current levels of 2000+, NIFTY has a indicative earnings of 2000/15 = 133.
5. 15% compounded growth for 3 years places it at 200.

What will happen if this really materializes?

1. At a PE of 15, we should see the NIFTY at 200X15=3000 levels.
2. At a PE of 20, which have seen in history many a times, NIFTY will trade at 4000+.
3. 15% growth in net profits is a very conservative expectation and even a rate of 20% should place the earnings at 230 and NIFTY can even touch 4600.

Hope you now understand why FII s are pouring money to India. Why Indian markets are moving like a bullet.

Bears, beware. Do not loose money.

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