As per PE ratio Nifty could touch 3500 levels in 2012 - possible target for nifty downside

From the month of October 2010, i am very much bearish in the world stock markets, i wrote several threads and also suggested my friends to book their profit in stocks. But most of them turned down my suggestion and some of them told me "F00L" . It's OK, now it's clear who is "F".

In October 2010 i wrote about the "Wrong Bull market" started in 2009. and also mentioned about the PE ratio of Nifty, which was at the peak "25". i warned the traders of double top at 6300 levels at that time.

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Indian stock markets in Bear market

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Bull market over in 2008

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Nifty PE
Ratio at peak

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i post the PE ratio and chart analysis wait and watch

i post the PE ratio and chart analysis wait and watch

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Nifty PE ratio chart gives you idea about Bull market and Bear market

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2003 2004 chart

This chart clearly shows that when nifty was at 921 levels in the month of May 2003 , the PE ratio was at 10 and when nifty topped at 2015 levels in Jan 2004, PE ratio was at 20 - 21.

so, When the PE ratio was at lower levels, nifty price too was low and when PE ratio touched higher levels , Nifty not able to rally further and fell nearly 50 % in the mid of 2004.

this is just one year data, i update further years, so that you can understand how Nfity PE ratio deciding the bull market and bear market.

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PE ratio in 2005

In the month of March 2005 market was at a peak of 2183 , that level was the ever highest level at that time and above 2004 jan high of 2015 levels. but the PE ratio was only 15.38.

you should note that on Jan 2004 when Nifty was at 2015 levels the PE ratio was at 20 -21 levels, but on March 2005 Nifty at 2183 levels but PE ratio was still at 15 levels, so there was no correction in the market .

In the month of May 2006 market touched 3774 levels in nifty and the PE ratio touched a Peak of 21 again, so there was a big correction which lead the Nifty to 2595 levels again. on June 2006 the PE ratio cooled to 14 levels and buying started.

This type of trend still continuing . So, take care about PE ratio and ride the rally.

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How i am saying 3500 levels is possible ?

Well, as per the PE ratio and Nifty price calculation i find one thing.

in 2003 range : PE ratio at "10" means buy signal and if touch "20" it was a sell signal .

then the lower band and upper band changed to "13 / 14" and "25". it still continues.

Now PE at 18 . On Sep 2010 nifty was at 6300 levels and PE ratio at 25 / 26 . so half the values will be "3150" in Nifty and PE ratio "13". well, this is a rough calculation. As i mentioned in a previous thread i expect nifty and other world markets to be in a time based correction for a long period.

coming back to the point, On May 2009 there was a heavy gap up opening in the Indian markets due to the central governemnt election results announcement. that gap up around 3600 / 3700 levels is not yet filled. so nifty could touch 3500 levels, the possibilty is high as per my PE Ratio theory.

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