Too Hot to Handle?

Worried about whether to buy stocks or wait for a crash? Here's the solution

- Karthik Anand Vijay

Towards the end of June 2023, an analyst of our team noted something interesting: 29 companies in the BSE 500 index were trading at a P/E of over 100 times - nearly 6 per cent of the total constituents! As our team sat down to dissect what was happening, a barrage of questions was put forward.

Here are a few of them:

If a stock is overvalued, should we sell it?

Should we invest in the current market? 

Should we sell companies that have risen considerably?

We also deliberated on an investor's approach to the current all-time high market phase. Arguments were made to and fro - some conflicting and some confirming.

But one thing became clear - you need to have the right mindset. As successful investors often say investing is about picking the right businesses, not stocks. These two are different. While both go through ups and downs, stocks (and the stock market) fluctuate between extremes - from euphoria to manic depression.

This adds difficulties to an investor's life. If you easily succumb to the market's fluctuations, you won't be able to generate good long-term returns, no matter how many good companies you have in your portfolio.

Given the current all-time high market, we thought it would be great to address some of these concerns and help you find some answers. So, read on to find out how to be greedy in the long term.

Predicting the unpredictable

Should investors be happy or cautious, given the current state of the market?

The Sensex recently breached the 65,000 mark. In fact, many stocks reached their all-time high. Here are some data points (as of July 7, 2023) that will provide you with more insights into the present state of the market: Of 1,380 companies with a market cap of over 500 crore, 408 (or about 30 per cent) reached their all-time high in 2023.