Is Nifty Over Valued

1/10/2021 BT Insight: Are Sensex, Nifty overvalued?
Here's what metrics show
Sunday, January 10, 2021 | Updated 22:54 IST
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BT Insight: Are Sensex, Nifty overvalued?

Here's what metrics show
The GDP growth fell to 7.5 per cent in the July-September quarter compared to a contraction
of 23.9 per cent in the April-June quarter
Aprajita Sharma November 30, 2020 | Updated 13:10 IST
Story in
Audio
ECONOMY IN NUMBERS
GDP GROWTH JOBS GROWTH
UNEMPLOYMENT INFLATION
BUSINESS TODAY
The market is considered in the bull market if the Warren Buffett indicator moves in the range of 70-80 per cent and
above
MORE FROM THE Budget 2021: The Growth Recipe

AUTHOR The stock market is hot and running. The benchmark Sensex This Issue | All Issues
hit its all-time high of 44,825.37 last week, while Nifty crossed
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13,000 for the first time. However, the stock market is not
really reflecting the true picture of how businesses are doing. "I Available on :
don't know why the market levels are where they are right now,
Expect 5-fold jump in
NPS fund management when the economy is in the mess. It's the same globally. But I
fee; slabs to be
introduced
have not seen it in my 35 years of career," says Nithin Kamath,
Founder & CEO at Zerodha.
https://www.businesstoday.in/bt-insight/analysis/bt-insight-are-sensex-nifty-overvalued-here-what-metrics-show/story/423415.html 1/6
1/10/2021 BT Insight: Are Sensex, Nifty overvalued? Here's what metrics show
The GDP growth fell to 7.5 per cent in the July-September

Kotak 811
quarter compared to a contraction of 23.9 per cent in the April-
Zero Balance
June quarter. The contraction in Q2 may have been slower, but
A/C
the economy has slipped into a technical recession. The
Working Towards Work-
markets will react to the news on Tuesday. Meanwhile,
LATEST MUST READ TECH NEWS
investors would do well to read into various valuation metrics
outs
to gauge the market direction. Six of top-10 rms add Rs
60,198 crore in m-cap;
Infosys, TCS biggest
gainers
L&T plans to hire 1,100

engineers across business
verticals in 2021
PNB puts 3 stressed

accounts up for sale; bids
to open on January 6
'Don't drink alcohol', says

IMD as cold wave expected
in North India
Mann Ki Baat highlights:

'Need world-class
products, nd Indian
alternatives to imported
items,' says PM Modi
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Click here to Enlarge Story in
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Price/earnings (PE) ratio TheHindu.com
The most popular valuation metric is studied in two forms --

the trailing PE ratio and the forward PE ratio. The Nifty 12- This stock held by Rakesh Jhunjhunwala
hits all-time high, rallies 350% in 9 months
month trailing PE quoted 35.71 on November 26 compared to
its long-period average of 19.8x. A range between 25-30x is
considered highly overvalued. Topper of his class, Prajwal ghts blood
cancer
As for Nifty one-year forward P/E, it is trading around 22.6, impactguru.com
says Deepak Jasani- Head of Retail Research at HDFC

Securities. This is higher than the 10-year average of 18.5. The Woman fraudulently uses Ratan Tata's car
number : News Reel
higher the value above the long-term average, the more
overpriced the index becomes. However, Jasani says the
average PE of last five years is 21.1. He believes the PE band Coding Classes For Age 6-18 by IIT/
requires revision in terms of valuation indicator. Harvard Alumnus
CampK12
Jack Ma arrested? Chinese media says

Alibaba founder 'embracing supervision'
This uncovered Japanese secret battles

stress & anxiety
nuubu.com
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"The levels of P/Es have been lifted over the past few years Invest in Amazon from 200$. You could
driven by rising liquidity and falling interest rates. So even earn, up to $2000! Don't miss this chance!
though the current P/E seems higher than the 10-year average, Smart Investors
it is not far from the five-year average," he says.

This pharma stock has risen 110% in last
CAPE ratio 12 sessions; did you miss the rally?
With substantial blip in corporate earnings in the last two

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quarters due to COVID-19, experts say the PE ratio may not be
a correct metric to judge the market valuation. They say
Cyclically Adjusted PE Ratio (CAPE) that takes into account
average earnings of last five to 10 years may give a better
picture.
Introduced by Nobel laureate Robert Shiller, CAPE is also

called Shiller PE ratio. But even this metric is showing
overvaluation. "Market is expensive as per our CAPE model for
the Nifty. At ~26x the market is above 1 standard deviation
(s.d.)and that is a clear sign of overvaluation. CAPE closer to Amrutam cares
the long-term average would indicate fair valuations while
about you
closer or below -1 s.d. would indicate extreme undervaluation
as was seen during the market crash of 2008 and during the
Taper tantrum period of 2013," says Vinod Karki, Head - Authentic Ayurvedic
Strategy, ICICI Securities. Formulation: This Ubtan
contains Haldi, Chandan,
Market cap-to-GDP ratio Manjistha and Khadir
Market cap-to-GDP ratio, also called the Warren Buffett
indicator, has been volatile as it moved from 79 per cent in Amrutam
Story in
FY19 to 56 per cent (FY20 GDP) in March 2020 to 80 per cent Audio
now (FY21E GDP) - above its long-term average of 75 per cent,

says Motilal Oswal Securities. The market is considered in the
Open
bull market if the Warren Buffett indicator moves in the range
of 70-80 per cent and above.
BEER ratio
Bond Equity Earning Yield (BEER) ratio compares 10-year

government security yield with the earning yield of the stocks
or a stock index. A BEER ratio of 1 means that both equity and
bond market have equal level of perceived riskiness (or both
equity and bond markets are fairly valued). BEER ratio greater
than 1 means that equity market is overvalued, while BEER
ratio smaller than 1 means that equity market is undervalued.
According to Jasani of HDFC Securities, the current BEER

ratio is 1.33 based on one-year forward earnings yield. "The
historical range of BEER ratio in India has been between 1.5
and 0.8. Based on this band, there is scope for either the 10-
year Gsec rate to move up or earnings yield to fall (and hence
P/E ratios to rise)," says Jasani.
Other valuation metrics that one may look into include PEG
(price/earnings to growth) and price-to-book ratio. While PEG
ratio depicts today's earnings and the expected growth rate,
P/B ratio shows the difference between the market value of a

company's stock and its book value.
What should you do?
It's time for caution. If you have to make fresh investments, you
should not invest all your surplus money in one go. Take
staggered approach to investment. If you are already invested,
you must figure when to book profits.
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"Your decision to book profits will depend on your financial

objectives and asset allocation. If you invest in equities for the
long term, the option of profit booking arises only for two
reasons; first, if you are approaching a long-term goal for which
the investment needs are to be utilised, and secondly, to
rebalance your asset allocation. Therefore, the right time to
book profits is when you come under such circumstances
otherwise you should not book profits simply because everyone
is selling or the market is at its peak," says Palka Chopra, Story in
Audio
Senior Vice President at Master Capital Services.
Also read: Tata, HDFC groups in race to cross $200

billion market capitalisation
Also read: Financial markets closed today on account

of Gurunanak Jayanti
Also read: NSE cash segment hits all-time high

turnover of Rs 1.47 lakh cr on last trading day of
November
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1/10/2021 BT Insight: Are Sensex, Nifty overvalued?

Here's what metrics show

Sunday, January 10, 2021 | Updated 22:54 IST

CORONAVIRUS VACCINE GOOGLE SBI INDIAN RAILWAYS INDIAN ARMY

Home BT INSIGHT Analysis Story Enter search keyword

BT Insight: Are Sensex, Nifty overvalued?

Aprajita Sharma November 30, 2020 | Updated 13:10 IST

MORE FROM THE Budget 2021: The Growth Recipe

The GDP growth fell to 7.5 per cent in the July-September

L&T plans to hire 1,100

PNB puts 3 stressed

'Don't drink alcohol', says

Mann Ki Baat highlights:

The most popular valuation metric is studied in two forms --

says Deepak Jasani- Head of Retail Research at HDFC

Jack Ma arrested? Chinese media says

This uncovered Japanese secret battles

it is not far from the five-year average," he says.

With substantial blip in corporate earnings in the last two

Introduced by Nobel laureate Robert Shiller, CAPE is also

now (FY21E GDP) - above its long-term average of 75 per cent,

Bond Equity Earning Yield (BEER) ratio compares 10-year

According to Jasani of HDFC Securities, the current BEER

P/B ratio shows the difference between the market value of a

What should you do?

New 3 Multibagger Stocks

"Your decision to book profits will depend on your financial

Also read: Tata, HDFC groups in race to cross $200

Also read: Financial markets closed today on account

Also read: NSE cash segment hits all-time high

Get Daily Newsletter

Enter your email I agree to receive newsletters SUBSCRIBE

DO YOU LIKE THIS STORY?

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Previous Story Next Story

BT Insight: Want insurance for COVID-19 hit winters unlikely to derail

Is BJP going the Congress way?

Topper of his class, Prajwal ghts blood cancer

Coding Classes For Age 6-18 by IIT/ Harvard Alumnus

This uncovered Japanese secret battles stress & anxiety

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