- March 18, 2024
- Posted by: Intrinsic Value
- Categories: cyclical investing, Finance & accounting, Investing strategy, value investing
Market has corrected sharply!!
While the smallcap index is down about 15%, some stocks are down 30-40% also.
Short overview- Market was overvalued since last 4-5 months. But it needed excuse to correct. stress test has given that excuse. Apart from that, march is usually volatile. Due to year end, Tax harvesting makes a lot of investors exit their holdings and Re-enter to avoid Taxes. This is also the reason we see a lot of Quality companies with good valuation today.
Outlook- We said in latest Quarterly report also that market is overvalued and that was the reason why we exited 2 stocks also early in this month. That has been the only positive fact lately.
Looking at market today, nothing has changed.
Our Valuation index still shows huge divergence between Overvalued and Undervalued Ticks even after today’s correction. That concludes that market is still overvalued. So it will be a big mistake to go for overvalued companies, doesn’t matter how much growth they are promising.
Looking technically, It is a once in a 10 yr event when the smallcap index has corrected more than 6 weeks consecutively. Last time it did was In 2009. So in short- mid term atleast we can expect some revival. But that doesnt mean index can not correct 6 more weeks after a short reversal.
Looking at FII/DII data, all we see is Green.
DII has bought 28,589 Cr worth Equity this month including today’s Buy of 9,093 Cr
FII has sold 4595 Cr of Equity today but monthly they are also Net Buyer of 9,818 Cr
Looking at individual valuation, Many Opportunities seems to be making their bottoms here. So we plan to Give recommendation in those. We are tracking nearly 45 companies where we might give recommendation if the correction continues / our buying price comes to that.
One mistake investors do at such moments is they go for the companies which have made multibagger in last 2-3 years and have corrected 20-30% in this correction. this mistake should be avoided at any cost, because such corrections become the reasons of cyclical shifts among sectors. for example in Nov21, investing in IT/speciality chem was a mistake but investing in real-estate/infra was profitable.
To conclude
a. very few opportunities, a lot of traps
b. Overvalued markets
c. Look for good businesses with a good margin of safety
d. Look for underperformed yet robust sectors.
Looking technically, It is a once in a 10 yr event when the smallcap index has corrected more than 6 weeks consecutively. Last time it did was In 2009. So in short- mid term atleast we can expect some revival. But that doesnt mean index can not correct 6 more weeks after a short reversal.
Looking at FII/DII data, all we see is Green.
DII has bought 28,589 Cr worth Equity this month including today’s Buy of 9,093 Cr
FII has sold 4595 Cr of Equity today but monthly they are also Net Buyer of 9,818 Cr
Looking at individual valuation, Many Opportunities seems to be making their bottoms here. So we plan to Give recommendation in those. We are tracking nearly 45 companies where we might give recommendation if the correction continues / our buying price comes to that.
One mistake investors do at such moments is they go for the companies which have made multibagger in last 2-3 years and have corrected 20-30% in this correction. this mistake should be avoided at any cost, because such corrections become the reasons of cyclical shifts among sectors. for example in Nov21, investing in IT/speciality chem was a mistake but investing in real-estate/infra was profitable.
To conclude
a. very few opportunities, a lot of traps
b. Overvalued markets
c. Look for good businesses with a good margin of safety
d. Look for underperformed yet robust sectors.
Keep sharing ur wisdom, it is really insightful.thanks.