When markets are down, most investors start panicking. It's a normal reaction. After all who will not panic when they see their hard earned money going down? But this panic leads to the most irrational behavior. At such times they would do well to remember 2 most important things.

The first one is to "not start bottom fishing". Most investors who think of themselves as rational, start calling the bottom for different stocks. They start looking at all available data to identify when the stock will bottom out. They prefer to stand on the side of the road before picking up any investment. More often than not, these investors end up not investing at all. They miss all good opportunities. The truth is it is almost impossible to call the "bottom" for any stock. It is better to have a valuation band in mind rather than having a bottomed out stock price in mind. Invest when valuations are low so as to not miss out an opportunity.

The second thing is to "not sell in panic". This is something most investors tend to do. When they see prices of stocks hitting new lows, they tend to panic and sell their investments. But at such times they should actually question as to why are they selling? If there is nothing wrong in the company's fundamentals then just selling for the sake of it, just doesn't make sense. Instead such falls should be viewed as an opportunity to buy more of the good stocks.

Markets are driven partly by fundamentals and partly by emotions. When emotions run at a tangent to fundamentals, and the markets fall, it just indicates a good buying opportunity. It would do well for investors to treat market falls as an opportunity to pick up their favorite fundamentally sound stocks.

 

Current Sensex PE is 19.76.

 

Market close was18154

 

Current EPS is 918

 

 

Now todays DNA says that we must expect an EPS downgrade.

 

Here is the link. http://www.dnaindia.com/money/report_now-brace-for-sensex-earnings-downgrades_1510723

 

 

Conclusion from the article is:

 

                                             Current year  next year       

Merrill Lynch expectations        1035                1265

 

Motilal Oswal                                                     1262 

 

 

So over the current EPS these two brokerages are expecting about 33% growth in EPS for the next financial year end.

 

All the rest in the article are talking of 16-18% growth. So their expectations for the next year end is about EPS of 1050.

 

Even at a sensex PE of about 25 the most optimistic target for sensex next year is 31625. This is almost a 90% growth over current sensex.

 

The consensus at 18% EPS growth and PE of 20 is sensex at 21000. This is 5% return over current sensex.

 

Can we trust the numbers being bandied about by these brokerages or they simply pick some number from the air.

 

 

 

Can this topic be shifted under a more appropriate grouping such as

 

Fundamental

The Equity Desk Forum :Market Strategies :Fundamental

Thanks a lot.

 

Originally posted by basant Why not?