market overvaluation and dud stocks
Is the Indian stock market overvalued? watch any business channel, and even the most conservative analyst will only say that the market is "fully priced". So, how does one go about figuring if "Mr Market" is in a very good mood and stocks have more than priced in their future earnings?
The broad market trades at a PE of 16 and earning growth is expected in to be in the region of 15-20%. The ensures a PEG ratio of 1 or less, which the bulls will argue is an indicator that the market is valued modestly.
I believe any acedemic argument on valuation can be easily countered by another explanation, which leads to no conclusion situation.
But how about tracking a stock, which you know for sure has no fundamental operations and marketing itself aggresively to the financial community. If the stock reaches absurd heights, then one can be sure of market overvaluation. In this bull run, i have chosen Teledata Informatics, an IT services company, which i believe has no fundamental operations and marketing itself very well, as an indicator. The stock was trading about Rs 13 a year ago, and has more than tripled to Rs 45. The co. heavily advertises about some govt. contracts it has won, which makes wonder about the margins! I would say Rs 45 is a ridiculous price to pay for the stock, which in turn reflects market overvaluation!
I wouldnt trust manic Mr Market with my cash now!
The broad market trades at a PE of 16 and earning growth is expected in to be in the region of 15-20%. The ensures a PEG ratio of 1 or less, which the bulls will argue is an indicator that the market is valued modestly.
I believe any acedemic argument on valuation can be easily countered by another explanation, which leads to no conclusion situation.
But how about tracking a stock, which you know for sure has no fundamental operations and marketing itself aggresively to the financial community. If the stock reaches absurd heights, then one can be sure of market overvaluation. In this bull run, i have chosen Teledata Informatics, an IT services company, which i believe has no fundamental operations and marketing itself very well, as an indicator. The stock was trading about Rs 13 a year ago, and has more than tripled to Rs 45. The co. heavily advertises about some govt. contracts it has won, which makes wonder about the margins! I would say Rs 45 is a ridiculous price to pay for the stock, which in turn reflects market overvaluation!
I wouldnt trust manic Mr Market with my cash now!
posted by tvm at 4:44 PM
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