Markets are at a new closing high. The Nifty ended on March 6 at 6401, which breaks through the last highs around this level, which were in 2008 and 2010.
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The Nifty though seems much more reasonable this time on valuations, as we are at about 18 P/E versus 22+ on the last two occasions.
The 200 and 50 day moving averages are also looking upward sloping.
Are we going to get a real breakout this time? Third time lucky, they say, but then they’ll tell you that for the fourth, fifth and sixth time as well.
The fear of course is that we’ll retreat again from these levels. The answer to that lies in the question - are we really at a new high? The fact that we have reached a new higher number doesn’t account for inflation. We’ll do another post for that, but you can assume that at an average of 7% inflation, we need to be 40% higher than 2008 for it to really be a new high.
Therefore, I do not advise caution. This is business as usual for the markets. I would stay invested.
What I can say is: expect a lot of volatility. But then, you already knew that….