Exit Strategies From Sip

posted on 01 January 2016 by Sunil Jhaveri

Equity markets follow Business Cycles. Over past 9 years, Sensex has delivered only 4-5% CAGR. Business Cycle & Markets were at their peak during 2007-2008 period; which came to an abrupt halt due to Global Financial crisis of 2008. Market cycle just reversed thereafter & has not recovered so far in terms of Global growth or even India Growth story. Our IIP numbers are dismal, Corporate Earnings growth have not been robust, and inflation was at an all-time high till 2013-14. Couple of bad years of monsoon also did not help matters. Though Equity markets are looking expensive in the context of PE Multiples (almost 21-23 on Sensex & NIFTY); one factor that can change or rerate the same is improving corporate earnings. When the denominator of PE Formula (Market Price/EPS) viz. EPS will improve, automatically market PE will get rerated & will come down due to improving Earnings Growth going forward. Currently, Public Sector capex & spending has started; which will be followed by the Capex