It is nature’s rule that if a pit is formed somewhere then a pile is formed on the other side there. In the past when the share market valuation had become expensive, we had found there to be an opportunity in gold and had also advised to invest in gold on 5th August 2019. At that time gold rate was Rs. 35,000 per 10 gms. Today, gold has crossed the mark of even Rs. 50,000. So everyone now is talking about gold everywhere. But at this moment id there any asset class which can give such huge returns like gold? Let us find it out in this blog.
The famous contrarian investor Mr. Marc Faber says instead of investing in the asset class whose valuation has become expensive, invest in the asset class which has long been depressed and where you find the bullish signal. So he further says, I would like to invest in such an asset class because I find an opportunity to earn excellent returns here. In January, 2008 when the market valuation of Sensex and Nifty had become expensive i.e. the Nifty PE had crossed the mark of 28 PE, soon after that the market witnessed a huge downfall. And later, in October 2010; the market valuation had again become expensive i.e. the Nifty PE had again crossed the mark of 25 there. So while the market was expensive, there was one asset class that was giving out bullish signals for the upcoming period. That asset class was Silver. So from October 2010 to April 2011, Silver gave out excellent returns.
In June 2019, the Nifty PE had crossed the mark of 29. Hence, the market had become too expensive. In most of our previous blogs we’ve discussed that the Nifty PE mostly moves between the range of 10 and 30. So when the Nifty PE crosses the mark of 20, the market becomes expensive and when it crosses the mark of 25, the market becomes even more expensive. And in June 2019, the market became very expensive. At that time Gold after moving in a limited range was giving the signal of moving out of the box. So here the market has became expensive and gold was giving out signals of uptrend. Now, what is this box technique? We have already discussed about this in our previous blogs. Do give it a look.
From August 2013 until 6 years Gold had performed in a limited range due to which it wasn’t giving much returns and that had made it a depressed asset. Thus, when in 2019 the market had reached an expensive valuation at that time gold had given signals of moving out of the box and after that as we all know gold gave excellent returns.
In January 2020, the market valuation had again become expensive and it had crossed the mark of 28. After that the market witnessed a fall and now again it has reached the mark of 28 PE which is very expensive. During this, silver after moving in a limited range from 2016 till 2020 has now given the signal of moving out of the box i.e. signal of uptrend here. If we analyze the chart of silver, we’ll find that after 2011silver faced a downfall then moved in a limited range from 2016 and now it has been giving signals of uptrend. If we observe, we find that since 2011; silver has become a depressed asset where investors didn’t earn too much returns. So now silver has given out signals of moving out of that limited range. After analyzing the chart, we find that till the time silver is above the mark of Rs. 45,000; in the next one or one and a half years, silver will reach the point of Rs. 65, 000 to Rs. 75,000. And if it closes above the mark of Rs. 73,000 then it may reach the mark of Rs. 1 lac even.
Talking about Gold and Silver both are precious metals. Silver is also used in industries as well. According to history whenever the share market valuation becomes expensive and you find bullish signals in gold/silver, then they mostly give out excellent returns. As gold and silver are precious metals, they don’t have a balance sheet. So by analyzing the market valuation and their chart of supply and demand, we can decide the plan of our investing as well as trading.
Now after analyzing the chart, we found that silver has given the signal of an uptrend. Silver is very volatile, hence while investing we should invest a limited capital and while trading, it is important to set a stop-loss as our prediction can go wrong as well. Else you may blame us. We haven’t posted this blog to give a tip regarding investing in silver. We have posted this blog to teach you the strategy that whenever the market valuation is high and you get an uptrend signal in any of the two precious metals; then there is an opportunity to earn good returns by way of investing or trading here. So if you wish to learn more such strategies then you can download the ‘Aryaamoney’ app and learn it all.
Now a very important thing you should note down. If you want to be successful in share market, commodity market and currency market then the money that you are allocating for trading should be kept minimum. On the other hand if you planning for a long-term investment in share market, commodities or currency market then make sure to allocate more capital here. Also, be it trading or investing, you should allocate money based on the market valuation. Once again, allocate less money for trading and allocating more money for long-term investment. Try to maintain a separate account for trading as well as investment.
Talking about the share market, in the near future 10,164 will act as an important support for Nifty. In the previous week Nifty has closed on a negative momentum. In the upcoming period if Nifty goes in the uptrend then you need to trade in only those shares that have given a signal of moving out of the box. Talking of share, L&T Infotech has come out of the box. Till it is above the mark of 1,890 it is in uptrend. So in the upcoming period if Nifty goes into uptrend and L&T Infotech also continues being in uptrend then you can trade there along with placing a stop-loss. As said earlier, the market is expensive so even if you trade; you should trade with minimum limited capital. Because, our prediction can go wrong as well. So following going with the trend, so can trade with a limited capital in shares which indicate by giving an uptrend signal along with stop-loss if Nifty goes in uptrend.
So coming back to long-term investments, as we have mentioned in most of our previous blogs; it is important to invest based upon the market valuation. Currently, the market valuation is expensive. Thus, you can invest in companies having sustainable competitive advantage but this investment should be minimum as market is expensive. This is known as Pyramid Technique. So later if the market valuation falls then you can increase your investments here. Later, when the market will again go into uptrend then you’ll earn good returns here. And we too have been earning good profit by following this strategy for many years now.
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The asset class which has become depressed and where people aren’t focusing much and if we get a signal there then we can invest and earn great returns by way of following the ‘Contrarian Investing Approach’. Thus, we have covered this strategy in a step-by-step manner in our today’s blog.
Until next time…
Happy Trading, Happy Investing!!!
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