Indian share markets are trading just above the dotted line in the noon session following amid mixed global markets. Consumer Durables stocks and bank stocks witness majority of the buying momentum while losses were largely seen in energy stocks and software stocks.
The BSE Sensex is trading higher by 93 points and the NSE Nifty is trading up by 9 points. Meanwhile, the BSE Mid Cap index is trading up by 0.2% & the BSE Small Cap index is up by 0.1%. The rupee is trading at 65.13 to 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.
The Warren Buffett Indicator Suggests Indian Equity Market Is Overvalued
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.
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.
Fortis Healthcare share price was trading up by 1.5% after it was reported that a Manipal Hospital Enterprises-TPG consortium has proposed a two-step transaction that will involve Fortis Healthcare hiving off its hospital’s portfolio into a separate listed entity that will then be merged with the acquirer, besides taking over the SRL Diagnostics unit.
As per the reports, under the proposed transaction, listed Fortis Healthcare is set to hive off its healthcare division into a separate listed entity that will be merged with Manipal Hospital, in which US-based private equity fund TPG owns about 20%.