Nifty and Sensex have fallen over 10% in 2022 and are currently at their weakest level. The Nifty 50, currently trading at 15,699, is 3.39 per cent away from its 52-week low of 15,183. The Nifty 50 index is down about 15% from its most recent high of 18000 as of April 2022 and is down about 17% from all-time highs. The Indian market is responding to global cues such as supply chain instability, record-high inflation, rising interest rates, a weaker rupee, rising crude oil prices, rising bond yields, and continued selling of equities by foreign portfolio investors due to the Russo-Ukraine war. are. (FPI). Nikhil Kamath, co-founder of Zerodha and True Beacon, highlighted that Nifty 50 is the most expensive index as compared to the international markets in light of the current market conditions.
“Many things could happen in India, one thing we are still not into is cheap relative to historical price multiples,” Kamat said in a tweet.
How is the domestic market one of the cheapest market share markets in the world based on the PE ratio?
Based on the indicator shown by Kamath, currently the price-to-equity or P/E ratio of Nifty 50 is 19.9 which is the lowest in last 2 years. However, the chart shows that India is one of the most expensive stock markets in the world, with the Nifty trading at a PE multiple of 19.9, higher than the S&P 500’s P/E of 18.95, the Nikkei 225 at a P/E of 18.79. Is. , FTSE 100 at P/E of 16.15, SSE at P/E of 13.26, DX at P/E of 11.73, Bovespa at P/E of 5.58 and MoEX at P/E of 3.96. Chart.
As per data from Trendline, at 19.9, the Nifty PE ratio is still well below both the 5-year peak of 42 multiples and the 5-year average of 27.46. The PE ratio of Nifty is also lower than the average PE ratios of 24.18, 29.13, 22.01 and 21.05 for 1 year, 2 years, 6 months, 3 months and 2 years. The Nifty PE ratio last year ranged between a high of 29.21 and a low of 18.92. The Nifty 50 PE ratio fluctuated during the five-year period from a peak of 42 to a low of 17.15. The fact that Nifty 50 has a high P/E and is one of the most expensive in the world suggests that it could be higher and the stock prices are comparatively higher than the global market.
Buffet Indicator GDP by Market Cap
The ratio of the total stock market valuation of a country to its GDP is known as the Buffet indicator. It is the total market value of all listed shares in the country divided by GDP; The higher the ratio, the more expensive the market. As per the data provided by Kamath, the US has a Buffett indicator score of 138.9% while Japan has a score of 113.03% which are the two most expensive markets in the world.
Based on the buffet indicator of its domestic market valuation of GDP, India stood at a much lower value than Japan and the US market at a ratio of 94.05%, but much higher than the UK at the buffet indicator of 89 per cent , Brazil is at 53.01. percent, Germany at 47.42 percent and China at 58.76 percent. India’s market capitalization to gross domestic product (GDP) ratio has remained uncertain, following multi-year high GDP forecasts, rising from 56% of GDP in 2019-20 to 112% in 2021-22 in March 2020 . Despite the poor market, India’s buffet indicator shows how expensive Indian stocks are.