We do believe that nobody can predict when NIFTY50 will breach 8000 levels again. We know for sure, in the long run it will not only breach 8000 levels but will also breach 10,000.

If we look at the history, not too far ago, in September 2015 we were trading around same levels and talking about great outlook ahead. Festive season was just about to start, inflation was under control and we were talking about interest rate cut, made in India project launched by the government and we all were pretty sure GST bill will turn into law very soon. Globally, China was giving warning signals about slow pace of growth in its economy, and USA was preparing its stage to start raising its interest rate.

The only difference was that during that time we were falling down from 9000 levels and today we are rising from 6800 lows.

The market has its own brain and no one can control them. In the short run, as Benjamin Graham said it works on popularity but in long run, it works as weighing machine.

Flash back two years and few months ago, when market was around 6000 levels, the new government came in power with majority, and new hopes and inspiration were fabricated and market had a solid run of 3000 points in one and half year without many legs or fundamentals to support this rally.

The expected change in the business world did not transpire. If we pick top five stocks on market capitalisation basis from this index and look only earnings growth numbers from 2014 to 2016, TCS earnings grew by 25%, Reliance Industries earnings by 23%, HDFC Bank earnings by 39%, Infosys earnings by 28% and ITC earnings so far by 8% till 2015. You won’t find more than 2 or 3 names from the index where earnings match with the rally.

For the markets to move up we need a solid base of its earnings which helps to sustain those levels. Looking at the fourth quarter and full year results so far, we do not expect overall earnings to grow more than 10% for the 2017 and little better if things improve in the 2018 for the index. Even if it breaches 8000 levels without any fundamental base, it will take no time to breach below again in no time.

We did booked profits last year from 80% of our holdings as market was throwing crazy prices against our calculated intrinsic values. We do not invest looking at the market, we buy quality stocks when they are trading at attractive prices. High quality businesses with good prospects with reasonable price are very difficult to find today. This is the reason we are holding big chunk of cash in our portfolio. Markets are tardy, fashion change and one day opportunities will become abundant. “Patience, my dear investors”.

Aziz Dodhiya is the chief investment officer for the Valueoperations funds which operates in the Indian market as an FPI (Foreign Portfolio Investor). We do not offer any personal advice to buy or sell any stocks and the views that are shared by Aziz might not incline to your personal investment strategy and this is the reason we advise you to take professional advice before going ahead with our views.