Monday, 10 Sept. 2018
The major reason why people lose money in the stock market
is that they always enter at the top and exit at the bottom. But to make money
in the market one has to do exactly reverse of it. But the problem is that how
to identify tops and bottoms. There are few solutions one of them has already
been discussed in our previous
blog (Click Here)
And the next one is here.
One simple but the most powerful
parameter is “Price to Earnings ratio” i.e. P/E multiple of the index i.e.
Nifty 50. History shows that the market forms bottom when P/E is between 12 to
15 and top when it is between 25 to 30.if you follow this simple trick you
won’t enter at the top and exit at the bottom and won’t lose money.
The above table shows, markets historical returns with
respect to the P/E multiple.
The above image gives, index historical tops and bottoms
with respect to P/E multiple.
Now the Currently PE is 28, it means market is about to make or near a top and it is not a right time for investment.
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- Auther
- Prof. Ashfaque Shaikh
- Research Analyst
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