Don't Fall for the "Long Term" Argument - Think Independently
One of the simplest measures for understanding whether Equity markets are overvalued or undervalued is the trailing Sensex or NIFTY PE (Price to Earnings) and/or PB (Price to Book Value). It may not be the most accurate measure as these are trailing PE or PB and not forward looking; nevertheless it still gives a reasonable indication of market valuations. Unfortunately we have never married Fundamentals to Equity investing. At 7,000 NIFTY, we said invest for long term, at 8,000 NIFTY and again at 9,000 NIFTY we repeated the same investment call of investing for long term. Definition of Long Term got stretched (to suit our calls) from 3 years to 5 years to maybe 7-10 years going forward.