Asian stock markets are lower in morning trade following news that Gary Cohn would resign as President Donald Trump’s top economic adviser after he lost a fight about tariffs. Cohn was one of several voices in the White House arguing against the planned tariffs on imports of steel and aluminum. The Nikkei 225 is off 0.19% while the Hang Seng is down 0.18%. The Shanghai Composite is trading up by 0.14%. Overnight, the US stocks closed slightly higher.
Meanwhile, Indian share markets have opened the day in the red. BSE-Sensex is trading lower by 120 points and NSE-Nifty is trading lower by 16 points. S&P BSE Mid Cap is trading lower by 0.3% and S&P BSE Small Cap is trading down by 0.4%.
Losses are largely seen in bank stocks, metal stocks and PSU stocks. The rupee is trading at Rs 64.99 against the US$.
The Market cap to GDP ratio for Indian companies is close to dangerously high levels. While this is still some way off the peak of FY-08, when it had once reached close to 150, it’s relatively high.
FY17 saw this ratio reach close to 80. It is also expected to increase further given the moderate growth expectations in India’s GDP for FY18. Warren Buffett once considered this as one of the best valuation metrics to gauge the markets.
The Warren Buffett Indicator Suggests Indian Equity Market Is Overvalued
Past history shows some correlation between the ratio and the share market. 2008 saw Sensex decline by 38%, when this ratio crossed the 100 mark. Also, the market has bounced back sharply when this ratio was low.
The basic assumption in this ratio is that whenever the GDP of the country grows, the market performance will reflect it. Also, when stocks do well, it can be extrapolated to assume the Indian economy is doing well.
In news from pharma sector, as per an article in The Livemint, Torrent Pharmaceuticals Ltd is readying a €2 billion (Rs 160 billion) bid for Zentiva N.V., the generic drugs unit of France’s Sanofi.