Why we need to start being cautious about this stock market bubble?

To start with, I don’t want to be pessimistic. We are not going to see any kind of correction in the stock market anytime soon.
Many sectors rallied more than double from March 2020. We are in the middle of the big bull market in a time of a serious pandemic crisis. Can anytime provide
one valid logic for this stock market bubble?
The stock market always reacts to the result and the stock market exactly predicted the rise of the economy all over and started a rally of the stocks.
I am among the others who started to be cautious in April-May 2020, Later predicted the market movement and could catch a small part of the rally and gained 80% Profit from my investment from May end to October. Fear due to fall made me keep some distance from the market.

Here are the reasons we should start being cautious in the stock market:

  • Extreme overvaluation of IT stocks:
    Seriously I don’t have a clue why the IT stocks were extremely overvalued. Top technology companies have more scope than never before but even slow IT services companies
    reached an unthinkable valuation of 30-40 P/E ratio.
    TCS, Infosys was trading around 38 P/E ratios. Can you think of a reason how these companies can still grow from the current growth rate?
    These companies have more than 500K employees with more than 10 Lakh crore valuation and quarterly revenue of more than 30K crores. These companies were growth from 6-8%.
    Don’t you think this valuation looks too high?
    The only reason what I can think is people are not sure what to do with the money and buying the known companies stocks using them and very high liquidity of Foreign institution causing an increase in Valuation.
TCS Stock Price
  • Not reacting to any bad news:
    The stock market is not reacting to any bad news and keep on reaching new highs. We had a new form of a coronavirus outbreak, chaos due to Trump supporters in America.
    Many developed countries again going to lockdown due to the coronavirus.
    No matter what news we have, the Market keeps on raising. Being a cautious investor, I have missed making any money during the past 3-4 months. I just can’t think of one the reason why any stock is cheap and being in good valuation.
Trump Supporters protest
  • No stock in 52 Week Low:
    For the past month, we did not have a single stock in 52 Week low levels. Being in the market for this decade, I have never seen this scenario. We have a lot of sectors that were under-performing than others. We are moving to the big bubble zones where market investors started speaking about 15000 Nifty levels. This is time we should be cautious as a retail investor and think of liquidating at least a few positions.

Inflation is too high and the economy is not having any means of V-Shaped recovery. Oil prices slowly starting to increase along with the metal prices.

It’s better safe than sorry. Provide your feedback in the comments.


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