Are we in a Bull Market ? I dont Think So !!

For the last many months I continue to hear that India is in a Bull Market and with a new Government its a different era etc.

We did get a good move in 2013-2014 but it was more selective in terms of many midcaps/smallcaps going up multi-fold but at the same time a bunch of them went down 50% too. As per the last statistic i checked a few months back 40-60% of the listed stocks have not crossed their 2007-2008 highs.

Let us look at the benchmark indices.

Nifty  Returns as of date - 07/11/2015

1 yr return = -4.5% 

2 yr return = 28.5%   ( 13% cagr )

3 yr return = 38%     ( 11% cagr )

5 yr return = 26%   ( 5% cagr )

7 yr return = 167% ( 15% cagr )

If you bought Nifty on 07th November at 2973 your CAGR would be 15% and even if at the lowest closing price of 27th October your CAGR would be 17%.  A lot of MFs, MF Distributors talk about 17% cagr for 30 years which is totally crap. ( A different post on that) will start facing the heat over next few years as 17% norm should shift to 11-14% ideally for long term return.

Is this what you call a Bull Market ?

Now the next argument comes its a Market of Stocks so let me take the Midcap Index.

CNX Midcap Index

1 yr return = 8.3%

2 yr return = 70%   ( 30% cagr )   -------------- Now this is where it looks like a Bull Market but returns in 2014

3 yr return = 63% ( 17.7% cagr )   ------------- Now thats not gr

5 yr return = 31% ( 5.5% cagr )   there now its closer to Nifty average return.

A majority of the return was made in 2013 August to Nov 2014-Jan 2015 and since then its been a slide down or a consolidation. Majority of the investors are standing on the returns made in 2014.

Remember this post of Random Portfolio ?

Best time for Advisors to show Performance Reports/CAGR to sell their services – Part 1.

https://nooreshtech.co.in/2014/10/best-time-for-advisors-to-show-performance-reportscagr-to-sell-their-services-part-1.html

As per the nos we are not really in a Bull Market but rather a major consolidation of years. We did get a super lumpy move in 2014. So stop calling it a Bull Market because you made returns in 2014 ( a lot of which was sentiments and luck. I was exremely lucky too 😉 ).

A lot of portfolio managers/mutual funds/ advisors use a nice trick of buying midcaps/smallcaps and then comparing it to Nifty and say - Look at My Returns and My Brains 🙂

( I am guilty of the same. Convicted.)

So now its going to get interesting when the markets are consolidating and it may not be that easy going ahead or it has already been way too tough ( am feeling the heat too ).

I believe there will be many opportunities in coming months with a lot of frustration being built up coz of lower returns and the past history of WOW returns sinking in.

We may not be in a Bull Market but we will get into a much bigger Bull Market going ahead. It can be delayed but not denied is my view. Time to buckle up - Be humble, be patient and work hard to control risks till that next trend sets in.

 

Happy Investing,

Nooresh Merani