High Volatility…wipe out fresh Shorts….!

The Nifty stocks are very cheap to the FIIs as the Rupee appreciated from 45 range to 39 range. The FIIs already invested in India are enjoying the benefits of their wise decision and even the new/fresh sect of FIIs are buying the stocks at almost 13-15 % less than the prices prevailed on the day, after the 50 basis points rate cut by Fed i.e from 18th Sep-07. The reports say that the FIIs have invested ($4.8+ billion) more than Rs14800/- crores since 18th to 1st Oct.

The current P/E of Nifty as on date is at 23.4 and the Nifty at 5211. Now the best P/E can be at 25-26. So mathematically the Nifty could touch 25.5*5211/23.4 works out to be 5679. The FII fund flow and the euphoria of chasing stocks can last for few days, later the basics will come on to the discussion table.

The P/E is at the 2008 earnings that were not even calculated as the Sep.-07, results are not announced but already discounted to a large extent. In case of any dampen results from the core sector then the damage can be disastrous.
Even every thing goes well then also the P/E will settle at 21+, works out Nifty to be at 4677 or P/E at 22 then the Nifty could be placed at 4899.

So, in case get exited by the current bull run and buying at higher levels can take you to carry for at least 2 years before things works out on the new earnings of 2009-2010.