Dear Investors,

The last four years have seen massive wealth creation, with almost all clients we serve making good returns. Since the beginning of the new FY, some investors are concerned, prompting the obvious question: Are markets at a turning point from extreme greed to extreme fear? Let’s explore this in our newsletter. But first, let us remember one of the greatest investors, Jim Simons, who passed away at the age of 86 on May 10, 2024. Born in 1938 and holding a PhD in mathematics, he is renowned for mastering the equity markets through quantitative investing, delivering over 60% returns for more than three decades.

Here are five principles Jim Simons lived by:

  • “Be guided by beauty. Just as a great theorem can be very beautiful, a company that’s really working very well, very efficiently, that can be beautiful.
  • Surround yourself with the smartest and best people you possibly can. Let them do their thing. Don’t sit on top of them. If they’re smarter than you, all the better.
  • Do something original. Don’t run with the pack. If everyone is trying to solve the same problem… don’t do that.
  • Don’t give up easily. Stick with it. Stick with it not forever, but really give it a chance to get where you’re going.
  • The final principle is hope for good luck. That’s the most important principle.”

Now, let’s delve into the question related to the fear of correction based on the rise in indices, especially in the mid & small caps.

The current bull market in India has been ongoing since 2019, and the COVID fall was merely an opportunity to invest because many reforms have taken place, and there is a massive shift in the economic dynamics, which led to a rise in earnings across states, industries, sectors, and businesses. Unlike the last bull run, which was narrow and large-cap biased, this time, it is holistic, which is why mid & small caps have performed better. And all this is backed by growth in earnings. So, too much fear is detrimental to investing.

Let’s see the numbers below.

While the Nifty index has grown in value from 12k to 22k, the earnings of companies within have more than doubled. Nifty 50 earnings as of March 2020 stood at approximately Rs 3 lakh cr. And the earnings of the remaining 450 companies in the top 500 stood at Rs 60,000 crores.

As of March 2024, Nifty 50 earnings have doubled, but the remaining 450 companies have seen a skyrocketing earnings growth to Rs 6 lakh crores—a 10x increase!

Stating below the data of expected growth in earnings of

Nifty 50 vs Nifty 500 indices

DESCRIPTION MARCH 2020 MARCH 2024 (estimated)
Nifty 50 Companies’ Earnings Rs 3 lakh crores Rs 7-8 lakh crores
Nifty 450 companies Rs 60 k crores Rs 6 lac crores
Nifty 500 Companies’ Earnings Rs 3.60 lakh crores Rs 14 lakh crores

We always strive to make investors optimistic, as this is the starting point of wealth creation through equity investments.

We also declutter investors’ concerns through objective evaluation of markets and assure you of the best investment services, backed by in-depth knowledge, driven by content, and analytics.

At PMS AIF WORLD, we understand the gravity of investment decisions, so we offer a well-informed experience and bespoke Wealth Management Services.

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