Gap between Sensex and Sensex@MRP widens. What should you do?
Sensex@MRP gives you an indication of whether the Sensex is fairly valued or whether irrationality is driving the markets. It is the intrinsic value of Sensex determined primarily by the earnings of the Sensex companies. So, the logic here is, if Sensex goes above Sensex@MRP, it signals that the market is moving from being rational to being irrational. It means you have to become cautious because if it continues to rise further, this rise is not justified by increase in earnings; it would thus be time to start selling off.
The quarter ending December 2012 looked up to the Government for some major reforms through its Union Budget for FY13-14, to address the macro problems affecting the economic growth of the country, such as slow investment growth, high inflation and rising current account deficit.
Capital intensive sectors took a hit on the back of sluggish construction activity and slowdown in order inflow, while companies in the defensive sectors outperformed.
In this backdrop, let’s look at how the Sensex 30 companies performed in Q3 of FY12-13? Has the market overvalued or undervalued Sensex vis-à-vis its MRP, and, what should investors do?
Click here to read the report on Sensex@MRP
What is MRP?
It is the maximum price that you should be willing to pay for a stock today. It indicates the intrinsic value of a stock.
What is Sensex@MRP?
Sensex@MRPis a tool which gives you clear BUY and SELL signals based on fundamentals thus making investing more profitable and not a game of mere chance. It helps you understand whether the market is fairly valued or whether irrationality is driving the markets.