The editorial “Bullish on India” (September 21) rightly points out that the bull phase in the stock markets is fuelled by foreign institutional investor (FII) inflows. This bull run is certainly not based on fundamentals but on technicals. The Price-Earnings (PEs) ratio in emerging markets such as Russia and Brazil are in respectable single digits but for India and China it is around 20 and 15 respectively. This effectively means that an investor has to shell out at least 20 to 15 times earnings to buy a share in a particular company. Have investors calculated how much they will have to pay to generate a reasonable return on a particular company? Obviously not.
I do not mean to be negative but it is always prudent for lay investors to rely on their own analysis before investing, irrespective of the advice of some “star advisers who frequently appear on TV channels,” as you have said.
J Venkata Krishna, on email
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