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

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Prashanth has been sharing some really super graphs and interesting market tidbits.

Have a look...

On the markets today - The focus is on who you are

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2014 - A good year for financial assets

2014 has a good year for financial assets. Investments in Equities including equity mutual funds and in debt – debt funds and fixed deposits have beaten inflation. Unless you had all you money in gold or gold funds, you have beaten inflation. Gold Funds gave a –ve return -6.10% as per Value Research.

This is a good time re-allocate you assets as per you financial plan. I am a firm believer in investing only according to a plan. Random investing to go along with the tide may be counter-productive in 2015. For 2015, stick to your plan and asset allocation. 

Debt

The returns from debt funds – have all beaten inflation. By November, WPI inflation was at 0 and CPI inflation at 4.38.

Given below is the performance of Debt Funds. Fixed deposit rates were about 9.00 – 9.50 % at the beginning of the year for deposits of > 3 years and those who had invested in debt / deposits have down well. The 8.75% returns for PPF and EPF in addition to beating inflation are tax-free. So we have had a year in which even debt has beaten inflation.

Debt – Income Funds	12.82
Debt – Short Term	10.49
Debt – Ultra Short Term	9.16
Gilt Funds – Long/Medium	16.40
Liquid Funds	8.76

Equities

Equities, especially mid-caps and small-caps, were the toast of the market. The BSE small-cap index was the top gainer at 66 per cent; the mid-cap index rose 51 per cent. The key benchmark indices, Sensex (on the BSE) and Nifty (on the National Stock Exchange), rose 29 and 30 per cent, respectively. These gains were despite about 2,000-point drop in 13 trading sessions between November 28 and December 17.

The below picture from the Business Standard gives a great snapshot.

Source: Business Standard

Returns from equity mutual funds - it has been good for Mutual Fund investors

Equity Large Cap Funds	34.69
Equity Mid and Small Cap	72.29
Equity Multi Cap	50.91
Equity ELSS	49.08
Hybrid Equity Oriented Funds	38.95

 However, international equity funds did not fare well and returned on an average 2.61% only. 

Gold

This picture from the Mint gives you a snapshot of how gold performed.

Real Estate:

It is difficult to analyse how real estate fared. However as per the NHB Residex, the performace this year hasn't been too great. While some pockets in some cities have fared well, overall real estate has not given the expected results this year. With piling inventory and stagnating sales, it remains to be seen how real estate will fare. See the below pic from the Business Standard. 

Finally, do your re-allocation now and keep investing systematically. 

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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