Irrational Exuberance

Nifty closed in September 2009 @ 5083 on 4/August/2010 close it is trading at 5486 which is almost 8% rise in just below one year; if one had invested in Bonds he would have got risk free returns. But still there is stock which has given multifold rise and many study point out that most of these stocks quote around very high valuation and just a euphoric rise seen in these stocks which have low equity and low floating stock making price rise easy.

ET article, irrational exuberance again? Now many stocks are recommended through SMS where low equity, low floating stock stocks are jump moving faster giving good returns. These kind of actions were seen in 2000 in Tech boom now Indian Consumer boom I would call this.

Investors normally get carried away by high return and they never worry about fundamentals, promoters or even if the company exists and what business they are doing and these kind of bubble if I can call in Small & Penny stock would be dangerous for small investors. My advice to retail small investors would be take a mutual fund route or invest in deposits where interest rates are rising as in 2000 after the crash 50% of the Companies vanished. Many wouldn’t like my advice which is very conservative but when stock Tips are available in PAN SHOP time to exit market my first lesson learnt in 1991.

Many fund houses have downgraded India latest is Nomura before CITIBANK, ML, but final phase doesn’t listen to any CAUTION

Nomura Turns `Neutral' on India Stocks After Rally on Valuations, Outlook http://www.bloomberg.com/news/2010-08-04/nomura-turns-neutral-on-india-stocks-after-rally-on-valuations-outlook.html    Indian stocks may be headed for a period of “consolidation” after a recent rally, Nomura Holdings Inc. said. Investors should move to a “tactical neutral” on India even though the 12-month outlook for the country’s equities remains positive, Nomura analysts led by Prabhat Awasthi wrote in a report today. They lowered their recommendation for Indian automobile stocks to “underweight” from “overweight,” according to the report.

PENNY STOCK & many other Small Cap stock are in over valuation ---- if u buy Value  and market corrects u can average but stock which do move for years --- CAUTION -- http://www.thehindubusinessline.com/2010/07/23/stories/2010072353251200.htm  penny stocks spurt-  Invest only in Value stock –

Irrational exuberance again? Select P/E ratios skyrocket http://economictimes.indiatimes.com/markets/stocks/market-news/Irrational-exuberance-again-Select-P/E-ratios-skyrocket/articleshow/6254238.cms   abnormally high levels of price-earnings, or P/E, ratio at which many stocks are quoting in the current market. Some 30 stocks are currently trading at a PE of 1,000 to 14,500 times, and there are many others quoting at a price-earning multiple of 100 and above.