Historically the PE of india’s market index has hovered between 17 to 27. Previously pe values of the index were not based on consolidated results. American markets are the benchmarks for the world’s markets and reflect where the markets are heading towards. Warren buffet’s indicator i.r gdp to market cap ratio of the current US market is around 156% . According to the indicator it should be closer to 100%. Anything above that is considered a heated market.
For now the valuations of the Indian Stock Market is slightly expensive , but we have to consider the effects of higher interest rates where flight for safety usually happens as the government bonds will have attractive yields. US govt bonds are almost yielding close to 5.2% and that’s a relatively high number.
Going forward there should be some correction as the interest rates will harden and this will lead to people moving towards bonds as a safe haven. But this will only give us an opportunity to enter at lower valuations and should be one of those lifetime opportunities.
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