Chart Nifty vs Bank Nifty

Bank stocks have been hammered. See the fall compared to the Nifty

Chart - Nifty vs Bank Nifty

Snapshot: Nifty PE, PB, Dividend yield and the worlds cheapest markets

The Nifty is at 7489 and the Sensex at 24617. 

So, where are we in terms of valuations, when the market has receded from recent highs? Two ratios to evaluate how expensive the market is are the market PE Ratio - (Price-earning ratio) and the P/B Ratio (price-to-book ratio). 

Today, the Nifty PE is 19.99 Nifty PB is 3 and the Nifty Dividend yield is 1.54 . 

Just for perspective, the highs on 8.1.2008 were PE - 28.29, Nifty PB - 6.55 and the  Dividend yield - 0.82

See this pic from:  The worlds cheapest markets 

A snapshot view of the Nifty PE, PB and Dividend yield as on 5.2.16

Do read this - Global stock market valuation ratios

Nifty PE & PB and snapshot of performance...

It has been a good year for investors who have been invested in equities and have remained so. A snapshot of performance in percentages over a year as on 23.12.14 is given below.

Category performance is from Value Research

One year performance of a few categories of Equity Funds

So, today  where are we in terms of valuations when compared to previous highs. The Nifty PE was 28.29 on 8.1.2008 and 25.72 on 6.10.2010. The price to book was at a high of 6.55 on  8.1.2008 and 3.97 on 2.11.2010.

Today the PE as per NSE is 21.12 and the PB is 3.49

 Source: http://www.nseindia.com/

How are markets valued today - Nifty PE and PB

The Nifty is above 8100 and the Sensex above 27100. Stock market indices are at all time highs.

So, where are we in terms of valuations when compared to previous highs. Two important ratios used to evaluate a share are the PE Ratio - (Price-earning ratio) and the P/B Ratio (price-to-book ratio). When evaluating the market, we take the PE and PB of an entire index to see its valuation and I have taken the PE and PB of the Nifty form 1.9.2006 and plotted on the below graph.

This chart shows the PE and PB of the Nifty from 1.9.06. We are far away from the high valuations of Jan 2008 and Oct. 2010. The Nifty PE was 28.29 on 8.1.2008 and 25.72 on 6.10.2010. The price to book was at a high of 6.55 on  8.1.2008 and 3.97 on 2.11.2010.

Today, we are at a PE of 21.22 and PB of 3.52 for the Nifty.

Source: http://www.nseindia.com/

Nifty PE and PB

Well we still have some way to go before valuations become expensive. One thing to note - as the economy revives and profits grows,  predictions of various brokerages may still turn out correct! 

SIP being the best way to invest for the long term,  here's an earlier post on how to invest using SIP properly!

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