With the market reaching new heights, many investors have questions. Have the Market reached the upper limit? Can we invest more even now?
The possibility that markets may now decline also crosses one’s mind. I do not see any evidence to support this. And yes, it is also true that it is unclear whether the market will increase or decrease soon. We only speculate based on our own biases; nobody knows. In the short term, markets reflect market sentiment, but in the long run, they reflect the state and health of the economy.
Imagine the Economy was a car 🚗 which had a speed of 100 km per hour with a 150 Horse Power Engine. The speed has now increased to 150 km/h, but this does not mean that the speed has reached its maximum – this is an important point to understand.
The reason for this is that the car’s power has increased from 150 to 200 horsepower. This means the car has the potential and energy to accelerate even further and reach much higher speeds.
The Market Index Level is the speed here, and the Horse Power is the Market P/E.
All I can say is that, despite the fact that the markets are reaching new heights and may be more expensive than the historical average valuation, the current market is still less expensive than the pre-covid markets.
Observe the graph or table below:
| Month | Sensex | P/E Value |
| Jun-19 | 39,395 | 28.27 |
| Jun-23 | 64,719 | 23.33 |
| Rise / Fall | 64.3% | -17.5% |
| Note: Trailing Valuation | ||
The valuation is still relatively less expensive than pre-covid levels, despite new highs.
Invest wisely.
Courtacy of the Article: Krishan Sharma and Dharmendra Satapathy
Happy Reading & Happy Investing!!!
Viralkumar Shah (Certified Financial Planner CM – USA)
Author – Financial Planning Sahi Hai! – Keep Your Life Organized