Assalamu Alaikum, I hope you all are doing well. The stock market recently fluctuated from around 99,000 to 93,000 due to political instability and rallies, which negatively impacted it. In today’s video, I want to explain why I still believe the current stock market levels are not the peak, based on available data.
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Market Trends and Analysis
Recent Market Highs
Yesterday, the stock market hit a record high, even amidst political disruptions in Islamabad. Despite concerns about a potential market downturn, I want to discuss why this is not the peak and how investors can use data to identify opportunities. I made a video seven months ago when the market index was around 73,000, and today it has risen significantly. In that video, I explained why the market wasn’t at its all-time high, and I stand by that analysis.
Examining Historical Data
Let’s examine the data further. Back in 2017, the revenue of the top 100 companies in the stock market was around 6 trillion rupees, with earnings of approximately 820 billion rupees. The market capitalization was 100 billion rupees, and the market made an all-time high at 53,000 points. Today, revenue has crossed 21 trillion rupees, and profits have reached 1.8 trillion rupees. However, the market index hasn’t adjusted proportionally to the earnings growth.
Impact of the Rising Dollar
The rise in company revenues and profits, especially those earning in dollars, can be attributed to the rising dollar rate. Higher dollar values have increased costs for consumers, but they’ve also boosted the revenues of companies, which benefit from this currency shift. Yet, the stock market price-to-earnings (P/E) ratio has decreased to historic lows. While the P/E ratio was above 12 in 2017, it’s now trading at levels between 5 and 6. This indicates there’s still significant upside potential.
Key Considerations for Investors
Revenue and Profit Growth
When evaluating the stock market, it’s crucial to focus on companies with increasing revenues and profitability. Look for consistent dividend-paying companies to maximize returns. Historical data shows that when interest rates decrease, investments shift from low-risk instruments to high-risk equity markets, driving the market higher. The current interest rates are expected to drop further, potentially increasing equity investments.
Mutual Fund Data
Mutual fund data reveals a shift from low-risk to high-risk investments. Recently, mutual funds have invested significant amounts into the stock market, highlighting growing investor confidence. Analyzing mutual fund holdings can guide you on where to invest, as funds often target high-performing stocks.
Conclusion
I hope this analysis helps debunk myths about the stock market being overvalued or in a bubble. By focusing on quality companies with strong fundamentals, you can navigate market fluctuations confidently. Let me know in the comments which mutual funds or companies you plan to invest in after analyzing this data.
Frequently Asked Questions (FAQs)
Q: Why is the stock market fluctuating so much recently? A: The stock market is experiencing fluctuations due to political instability and rallies, which create uncertainty and impact investor confidence.
Q: What contributes to the increase in company revenues and profits? A: The rise in company revenues and profits, especially those earning in dollars, is largely due to the rising dollar rate, which boosts revenues while also increasing costs for consumers.
Q: How can I identify good investment opportunities in the current market? A: Focus on companies with increasing revenues and profitability, consistent dividend-payers, and consider mutual fund holdings for guidance. Using tools to track mutual fund activities can also help identify top-performing companies.
Q: Is now a good time to invest in the stock market? A: Based on the data and analysis, there is still significant upside potential in the stock market. By carefully evaluating companies with strong fundamentals and growth potential, it can be a good time to invest.