The recipe for a Bear Market

[Yet to complete]

The headline Indian markets the Sensex 30 and the Nifty 50 were doing great then, they still are though the current rally is shouldered by Top 10 companies. Don't get me wrong when I say 30 and 50 it does not add up to 80 they are just 50 stocks as all 30 Sensex stocks are included in the Nifty 50 Index. The real pain lies else where almost 60 percent of the Indian middle class is invested.

LTCG - Long Term Capital Gains

It all started one fine day when LTCG was introduced over and above the current STT being charged. It was enough to spook investors and big fund houses, they still do not know how the LTCG calculation would happen.

That day the underlying principle of the Indian stock changed forever. What changed was the difference between Short term and Long term holding, gains made on shares held for less than 1 year was taxed at 15 percent and the Long Term gains made on stocks for more than 1 year was taxed at 10 percent however with riders such as grandfathering clause and tax only on gains starts when the investor makes more than 1 lakh profits in a Financial Year.

Now investors don’t think long term rather they pull their money out in the short term once their targets are hit,

also what spooked the investors was that taxes are generally followed by cesses applied to announced tax in future budgets and cesses can increase the main tax by another 3 percentage points.

Thanks to this spooking past year the govt does not expect much gains from this tax however investors holding big companies in large amounts over many years would have to pay up as this year IT sector and Reliance have rallied big year on year.

SEBI and ASM

Then comes the regulatory problem few years back it was GAAR which now no one is bothered about now. It's the market regulator SEBI and their new guidelines on ASM or the Additional Surveillance Measures that dropped investors holdings in some stocks at rate of 20percent a day.

That too because they leaked a list before telling the markets what these measures actually were and did not reflect anything on the operation of the company management. It was more of sucking the liquidity and volatility from a particular stock.

Lets be clear here if a mammoth company like RIL is brought under ASM it would be treated with the same fate as these other small companies which dropped the wealth by some 50 percent points.

Liquidity Crunch

Then came the great NBFC fiasco.

Lack of Knowledge

In today’s age investor’s don’t know what they are investing in they just look at their phone’s and read whats app messages which are mostly fake take for example PCJ

Then came the great Sebi markup telling MF’s to rejig their portfolio’s and restructure them also telling them to keep minimal holdings in mid and small caps and keep and it was decided not on company fundamentals but their how low their market cap was. Thus giving advantage to companies with a market cap in excess of 10k cr.

I don't understand wht these suit boot people. Come n news channels and say that mid and small caps are trading at higher valuations now what about companies which are the darlings of the stock market which are trading at >45 PE valuations mostly these FMCG companies however great companies with sound management and sustainable business models are trading at 15 PE

#Sensex #IndianEconomy