The Nifty 50 had fallen down 5% in the last one month and is trading at 8340. When we talk about the concept dancing near the door means that we are still invested in the market but if market stops dancing upwards and changes its course than we are ready to convert our positions into cash.

We are still not convince that market is very expensive and that is the reason we are still invested in the market. But we have a plan ready to execute if melt down starts.

Nifty 50 EXPECTED 2015 EPS EXPECTED 2016 EPS P/E 2015 P/E 2016 P/BOOK VALUE EV
IDFC 11.43 12.04 14.69 13.95 1.8 9.53
HINDALCO 13.01 16.23 10.3 8.25 0.75 10.21
SBIN 18.06 23.35 14.6 11.29 1.66
LT 47.31 61.61 35.46 27.23 4.63 19.8
INDUSINDBANK 34.02 42.72 25.89 20.62 5.15
INFY 109 121.07 20.2 18.19 6.01 15.36
ICICI BANK 19.35 22.76 16.26 13.82 2.49
TATA MOTORS 56.87 67.72 9.41 7.91 2.63 6.15
YES BANK 49.49 59.71 16.49 13.67 4.75
MARUTI 119.49 169.2 30.21 21.34 5.08 18.39
NTPC 11.12 11.66 13.09 12.49 1.38 8.74
ONGC 29.03 33.06 10.5 9.22 1.51 4.71
HDFC BANK 41.93 51.77 24.2 19.6 5.75
BAJAJ AUTO 115.05 133.74 17.53 15.08 5.74 12.08
GRASIM 217.78 295.36 16.39 12.08 1.51 7.61
AXIS BANK 30.9 36.76 17.68 14.86 3.37
NMDC 17.33 16.39 7.22 7.64 1.66 5.02
SSLT 19.55 20.64 9.64 9.13 0.76 5.97
TCS 109.14 124.5 23.04 20.2 10.02 18.41
ULTRACEMCO 86.15 117.41 32.52 23.86 4.48 19.27
AMBUJACEM 10.65 13.49 23.52 18.57 3.83 16.45
POWERGRID 9.75 11.68 14.85 12.39 2.18 11.37
BANKBARODA 18.78 25.58 8.57 6.29 0.92
TATASTEEL 25.2 38.2 12.5 8.25 0.75 5.99
ZEEL 9.38 10.96 35.98 30.79 11.91 23.41
KOTAKBK 38.44 47.53 33.8 27.33 5.27
GAIL 29.49 31.1 12.86 12.19 1.48 7.06
HEROMOTOCO 134.19 167.83 19.2 15.35 9.15 12.91
TECHM 31.61 40.06 20.43 16.12 6.75 14.06
LUPIN 53.92 64.25 36.25 30.42 12.68 28.35
M&M 54.16 63.75 21.94 18.64 3.16 9.32
PNB 21.06 27.49 6.97 5.34 0.69
DRREDDY 133.64 153.08 25.56 22.31 7.4 18.22
COALINDIA 23.5 26.91 14.81 12.93 5.18 8.81
CIPLA 16.58 23.59 41.86 29.42 5.52 23.74
BHEL 8.31 11.37 28.01 20.47 1.72 9.92
SUNPHARMA 29.92 35.7 33.8 28.32 11.3 42.07
HINDUNILVR 19.24 22.33 44.25 38.12 52.06 33.18
HDFC 38.9 45.93 32.46 27.49 5.29
ITC 12.24 13.69 25.94 23.19 9.32 18.14
ASIAN PAINTS 15.67 21.4 49.66 36.36 18.53 35.37
TATA POWER 2.62 4.92 28.59 15.22 1.42 7.98
ACC 71.32 92.12 21.73 16.82 3.54 16.46
BPCL 45.49 58.25 16.48 12.87 2.79 8.09
RELIANCE 74.52 80.07 10.89 10.14 1.32 9.05
HCL TECH 53.89 59.75 17.87 16.11 6.93 15.59
WIPRO 34.96 38.71 17.51 15.81 4.7 13.51
CAIRN 38.08 26.77 5.66 8.05 0.7 2.66
BHARTI AIRTEL 14.09 16.53 26.72 22.78 2.52 7.98
IDEA 8.5 9.13 20.27 18.87 3.67 9.65
total 2234.11 2719.87

 

Let us look at the Nifty 50 stocks and expectations from them. This table is the most important table to look at if you are interested only to invest in Nifty 50 stocks. Let me show you how few professionals will use this information for investments.

Nifty 50 is made up of many sectors, such as cements, paint, banks, telecom, infrastructure, refineries, oil and drilling, pharma, IT, housing, Auto, power, steel and media. In the table we have shared what are the analysts’ consensus for earnings for the next as well as for this year.

Looking at those analysts’ expectations, they are expecting an average growth of 22% in overall earnings. By average we have personally seen that those expectations diverge by 5% – 7% in any direction. Our advice will be to keep cross checking these expectations with the real results as the financial year ends in two days for the most businesses.

We start selecting our business looking at the quality of the business and then see if any is trading at cheap. The above table helps us in the middle of our research where we are interested to compare apple vs apple. For example, we own HCL Tech from the IT sector and PE ratio or price/book value doesn’t helps us to gauge whether it is trading cheap to its peers. In the IT sector Wipro is the cheapest one compare to its peers, but remember that not necessary that it is trading at discount to its intrinsic value. Enterprise value (EV) helps us to understand or reassures us when we buy any stock that it is cheap. Intrinsic values (IV) and Enterprise value (EV) are two different valuations.

To give another example, we also own Tata Motors from the above list and we know that it is trading at discount to its intrinsic value. The closest business to compare EV value to Tata Motors will be Maruti and M&M. Tata Motors EV tells us that it is the cheapest stock within its peers and if it falls down more we will be the first to jump and accumulate more stocks.

The most expensive stocks we think from the above list are LT, Maruti, Ultracem, Zeel, Lupin, Sun Pharma and Asian Paints.

We do believe that there is a better opportunity to make money outside Nifty 50 rather than investing in the top 50 businesses. In the last two years we had managed beating index returns by almost 20% and most of the stocks we own are outside Nifty 50.

Happy Investing!!