Timing the market: A metamorphosis over decade and a half There has been a big change in the concept of Timing the Market. While Raamdeo Agrawal of Motilal Oswal Financial Services says it is more of an index market now, veteran market expert Prashant Jain says effectiveness of PE multiple is a handy tool, Madhu Kela says it is possible to time the market once in a while. Raamdeo Agrawal, Motilal Oswal Financial Services, Prashant Jain, HDFC Asset Management Co and Madhusudan Kela of Reliance Capital joined 15th anniversary celebrations of CNBC-TV18 and discussed how investors can time the markets and make the most of their investments. However, there has been a big change in the concept of Timing the Market. While Raamdeo Agrawal of Motilal Oswal Financial Services says it is more of an index market now, veteran market expert Prashant Jain says effectiveness of PE multiple is a handy tool to time the market. On the other hand, Madhu Kela emerges as a believer in Timing the Market but with the rider that it can be done only once in a while. Below is the transcript of the interview with Latha Venkatesh on CNBC-TV18. Q: How has the market changed? Agrawal: When I started my business there were no channels. We used to simply go at 12 o’clock find some balance sheet in brokers office, read it, buy the stock after reading it in brokers office and still make money. Not that I was holding for 5-10 years, 3-6 months, we used to make simple money and that has shifted to index watching. It is no more a stock market, it is index market now. Latha: Is there no concept called timing the market at all? Jain: We can qualify that, it is very simple. PE multiple is a very simple, very effective tool. If you look at it markets in aggregate, when you don’t look at PEs for individual companies it is more complex but when you look at PEs for markets in aggregate, it has very high predictability; not over one year periods but over three and five year periods. Time and again we have seen and it should continue to happen in the future also that higher the PE in the market at which you are investing the longer should be your investment horizon. So, I have seen that at closer to 11-12 PE multiples even one-two years is good time. The moment you come 15-20 PE multiples one must think three years or longer. If you choose to remain invested at 25 PE multiples you must think five years or longer. If you choose to remain invested at 30 PEs or more you must think 10 years or more. So, higher the PEs the more should be your tolerance for volatility and the longer should be your investment horizon. I don’t think there is any one answer to this. Latha: Do you think we are in the start of something transformational, does it feel like say 1991 when pattern of investment in India or the Indian economy itself changed, does it feel like that? Kela: I don’t think there is any doubt in our mind. However, I don’t agree that you can never time the market. There are times, if you try to time it every month, every quarter then it is a traders job; it is not an investors job. I will time it once in a while like last August was a brilliant time without even Modi to allocate disproportionate we got 5000-5100 Nifty. If you had under invested even if you assume that Modi is not going to come but India is going to be what it is going to be in the next 10 years you would have still ended on making a lot of money. However, supposing in this euphoria if Nifty goes in the next one year to 25000, just hypothetical number, I would love to time it. Maybe the market had discounted as Prashant said that if you are in next one year at 30 PE, I would love to say please take out some money from the table. However, the problem is when one is trying to time it everyday, every month, every quarter. Once in a while you get an opportunity to time the market and that time you must exercise it and this is not the time to exercise that. Regards, Sandip Patel Dir: +91 (278) 2421919/ +91 9376001919 Pooja Investment & Advisory 206/Shilpgram Complex, Sant Kanvarram Chowk, Kalanala, Bhavnagar 364 001. (Gujarat) poojaadvisory Contact us for free online trading account for equity,commodity and currency with minimum brokerage . For Free Trial for technical BUY/SELL software poojaadvisory/Account/Register.aspx
Posted on: Tue, 09 Dec 2014 04:48:52 +0000
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