Are stock prices really cheap? Why I’m asking this question. Is it strange for me to ask this when Stock markets are trading at multi year lows and almost 60% down from 52 week highs.

One of my friends asks me whether he should invest in stock markets. I said, another 50% fall is there. He is shell shocked. He told me that I’m too bearish. He said this before a year, when I told him that Nifty could test multi year lows due to subprime meltdown. But that’s different story. Now coming to present prices, I’d like to tell my readers that please don’t get carried away by the prices. These prices are definitely not cheap. All your PE multiple of 2 and 3 would become 30 or 40 within couple of quarters and infact I’m expecting atleast 5 companies in Nifty to register negative earnings. I’m expecting Tata steel and Hindalco to register negative earnings. I’m afraid to see debt of both these companies which are ranked No.1 and No.2 in leverage on Nifty. With metal prices under pressure, I see negative earnings for these guys. Both of the companies have bought overseas assets viz., Novelis and Corus with big premium prices. Both these acquisitions could lead these companies to register negative earnings. Another one is Suzlon which is suffering from massive working capital requirements. This company has already posted negative earnings and I won’t be surprised to see this company come with big losses.

I’m bold enough to give indicative prices for few of the nifty companies.

Tata Steel – Rs.80

Tata Motors – Rs.70

Suzlon-Rs.15

Hindalco – Rs.20

BHEL – Rs.700

Now this is enough. In next article, I’d tell you why I’ve given these indicative prices for above mentioned companies. Till then wait and just think.

Caveat: This article shouldn’t be treated as investment advice. Its always better to analyze yourself and come with investment decisions. This could be self advertising exercise for me to highlight that I’m intelligent enough to find the prices. If it goes wrong I’ve nothing to lose because I’m an individual and not corporate. There is no corporate responsibility for me. But this doesn’t mean that I’m not educated enough to give predictions.