Fairval

Notes on Indian equities, sectors and economy

A Druckenmiller Interview and Indian markets

Posted by fairval on January 26, 2007

An old Stanley Druckenmiller interview has him talking on what made him go bearish just before in the 1987 crash in US markets. Investors in Indian markets may find some of his reasons worth checking out:

SD: It was a combination of factors. Valuations had gone extremely overdone. The dividend yield was down to 2.6%. Price/book was at an all-time high. Also, the Fed had been tightening for a period of time. Finally, technical analysis showed the breadth wasn’t there – the market strength was concentrated in only the high capitalisation stocks.

While valuations in Indian market are not very high yet, some other factors are similar. Dividend yield is under 1.5%. Price/book could be close to all time high, though havent checked this for a while. Interest rates are rising here as well. Also, the last part. From May’06, a large part of the rise was a few stocks. Hmm..

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2 Responses to “A Druckenmiller Interview and Indian markets”

  1. Anonymous said

    The markets can stay irrational longer than you can stay liquid.- John M. Keynes
    I guess what you should also look for are new records in volumes.
    KG

  2. Ajay Jindal said

    True, thats why most traders believe that – dont sell till the cycle shows signs of turning. So far, there is no sign or indeed any trigger for the rally to turn. I have no background in technicals, so dont know if record volumes signify the last round of a rally? My understanding was that the last rally is often weak in depth.

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