Thoughts on fundamentals, overvalued and future of CSE

As some of are concerned, through there was a small run from ASI 4960 to 5560 , we are yet to see the true uptrend at CSE which is the run of the fundamentals. Why do I say true uptrend. When fundamentals which are undervalued goes up they can afford to sustain value as their fair value is not reached. When crap and overvalued goes up they are temporary as they can easily come down as their values is artificial.

Now I see people are talking about another downtrend dropping ASI to 4700 or even 3000 on extremes ( I am not saying it will. If people panic like crazy and we do not have any faith in our market it can)

Okay but lets revisit the current situation.

Have you thought this way? I see good fundamental companies in PE of 3-8 now.

On the other end we see good companies as CARS is still trading at PE 20 , STLL at 17 , CARG over 20. Some other companies still trade over PE 0f 50-100s with no fundamental value with NAV or PE valuation and no potential for growth. So I still see there needs to be some correction of those companies.

Okay if ASI drops 20% ( just of argument sake to around ASI 4600 and presume other shares good or bad follow it )

then say

a )CARS will be 350 ( readjusted PE of 15-16)
b) SLTL Rs 36 ( readjusted PE of 13.58)
c) CLND at 36 ( overvalued by large amount still)
d) HAYLES at Rs 310 (possible but unlikely as DP is collecting)

I can go on but you get the idea.

Then what about good companies that are trading at PE of about 3-5 already.
Do you think it right to see ( maybe it will happen I do not know)
DIMO at Rs 800+ ( PE will be 2-3 then.)
PLC at Rs 10+ ( PE will be 4 then)
KCAB at Rs 55+ ( PE will be around 7)
JINS at Rs 9 + ( PE of 5)

Some people will argue that they deserve to go down as the future earnings due to gloom is reflected. Okay then I ask you , CARS even at Rs 350 is overvalued , SLTL at 36 is overvalued ( look I have no issue with CARS or SLTL as a company , am saying this as companies like CARS/BUKI/SLTL is holding up ASI due to high cap nature) and in that sense with many other companies.

Now, the ideal situation will be to see over-corrected not getting corrected drastically in a ASI drop and the over valued getting corrected further maybe drastically. Can this happen with individual shares Without a overall market drop. YES. But that does is happen at CSE? NO . If market down goes we will see all shares going down. The Good Bad and the Ugly. Who does it? Us ( retailers, brokers, HNWI etc)

We at CSE are still maturing in mentality and education. We do not care for a sustainable market where we can invest with confidence. Our market is volatile and chaotic due to irrational behavior.

SO what can we do, in this in-mature market ( for long term players not traders)

a) educate ourselves more to understand issue like above
b) do not act on extremes on short tern fluctuation if you are an investor and sell for example KCAB at Rs 50 it it goes there ( if you are trader it is different). To me it will be an opportunity to buy and not to sell.
c) know how to identify "gems" in market drops as the good can get even cheaper in these negative
situation
d) try not to touch overvalued and the crap now as it destroys CSE in the long run and also does not help the current situation : undervalued drops and over valued sustains value relatively which is not right for a healthy market. THink what will happen if companies below PE of 9 does little change in value in drops but companies with PE of 20 and above corrects drastically. What do you think will happen to ASI? Market PE? WHat do you think will happen to fundamentals. Can you see a brighter future for CSE?

I know this is wishful thinking as most of us act on extremes . We still do not act on fundamental valuations or any knowledge base. We are making CSE a place for panic, following heard to gamble. We want to get rich overnight. Are we ( retailers, HNWI , Brokers) collectively destroying CSE and not let a matured market form itself?

So finally, try not to push up overvalued and crap as a duty which will kill OUR MARKET ( for all of us and not only for our selfish gains) If the market drop understand the value of fundamentals and opportunities they create vs investing is overvalued and putting ourselves into a deeper mess. Let overvalued correct itself without our help to raise it again. Let fundamentals hold its value without us helping to sell it cheaper. Let the market act rationally and consolidate.

Please understand I am not mixing issues with our short term, medium term and long term shares. I am talking about also planning now for a stronger Long term future ( if we want one) and not quick gains always for personal gain. We as investors has a duty at CSE other than money, money, money and personal gain.

By the wat guys, I do not know ASI will drop below 5000 again.I can depends on our collective doings. My ideal hope is that it consolidates between 5000-5500 for while. Soon March 31st results will be up and Market PE will be re-evaluated by CSE. Presume it will be around PE of 11-12 if ASI is around 5000-5500.

slstock wrote:By the wat guys, I do not know ASI will drop below 5000 again.I can depends on our collective doings. My ideal hope is that it consolidates between 5000-5500 for while. Soon March 31st results will be up and Market PE will be re-evaluated by CSE. Presume it will be around PE of 11-12 if ASI is around 5000-5500.

nicely written article
Maybe ASI will drop to 5000 and create double bottom, also if the authorities dont sort out the system issues and stop changing rules overnight people wont be confident enough to invest

Thanks slstock for your professional approach & analysis.

I would like to comment on the prices of SLT, CARS, HAYL, CARG.

This is a classic example as to price determination by market forces. DEMAND and SUPPLY.

All the above shares are closely held.

* SLT (GOSL 53.52 + Managing Partner 44.98) free float is only 1.5%
* HAYL still there's demand from DP
* CARS and CARG closely held and market quantities are with various institutional shareholders.

The common similarity in all these shares is quantities held by retailers and market players are negligible. So they are less prone to market shocks. Even the prices of above shares dropped in a blood bath situation, they will quickly adjust to previous prices.

Thanks Slstock for the valuable impartial article on CSE.
My concern is slightly similar to you.
Why we need to worry too much on the index side.
As a investor go for the fundamental (need careful studies by ourself) and if we can hold for our time frame is better.
As a trader study the charts of the particular interested stocks only and do some swing trade.
Index based investment is more related to fund mangers.
As a retail investors like us no one want to fill our portfolio with 270+ counters.
If I'm wrong correct me.

I know this is wishful thinking as most of us act on extremes . We still do not act on fundamental valuations or any knowledge base. We are making CSE a place for panic, following heard to gamble. We want to get rich overnight. Are we ( retailers, HNWI , Brokers) collectively destroying CSE and not let a matured market form itself?

Really appreciate your valuable article at this precise moment.
Thanks a lot.

Good educational post.. Thanks slstock

These days we have a bunch of ppl who wanna burn their hands going after hot stocks with no fundamentals at all. Then come here and ask what to do?
Its always be safer than sorry,... hope at least these guys read this thread and learn something..

Good stuff, good reading for beginners and everybody.

-- quote--
a )CARS will be 350 ( readjusted PE of 15-16)
b) SLTL Rs 36 ( readjusted PE of 13.58)
c) CLND at 36 ( overvalued by large amount still)
d) HAYLES at Rs 310 (possible but unlikely as DP is collecting)

-- quote--

The above looks very scary and maybe need to happen as well. I read that lot of big funds still wait for the market PE to be single digit for them to start investing. we could pick certain things from those statements as well.