This is the April 2017 update for the State of Indian Stock Markets.
As usual, this monthly update includes historical analysis and Heat Maps of Nifty50 as well as Nifty500‘s key ratios, namely P/E, P/BV ratios and Dividend Yield.
Please remember that these numbers are averages of P/E, P/BV and Dividend Yield in each month. Neither Nifty50 heat maps nor Nifty500 heat maps show the maximum or the minimum values for each month.
Caution – Never make any investment decision based on just one or two ‘average’ indicators (Why?) At most, treat these heat maps as broad indicators of market sentiments and a reference of market’s historical mood swings.
So here are the Nifty 50 Heat Maps…
Historical P/E Ratios – Nifty 50 (Monthly Average)
P/E Ratio (on last day of April 2017): 23.63
P/E Ratio (on last day of March 2017): 23.26
Historical P/BV Ratios – Nifty 50 (Monthly Average)
P/BV Ratio (on last day of April 2017): 3.55
P/BV Ratio (on last day of March 2017): 3.50
Historical Dividend Yield – Nifty 50 (Monthly Average)
Dividend Yield (on last day of April 2017): 1.23%
Dividend Yield (on last day of March 2017): 1.25%
Now, to the historical analysis of Nifty500 companies…
As the name suggests, Nifty500 is made up of top 500 companies which represent about 95% of the free float market capitalization of the stocks listed on NSE (March 2017).
Nifty50 on other hand is an index of 50 of the largest and most frequently traded stocks on NSE. These represent about 63% of the free float market capitalization of the NSE listed stocks (March 2017).
So obviously, Nifty500 is comparatively a much broader index than Nifty50.
Historical P/E Ratios – Nifty 500 (Monthly Average)
P/E Ratio (on last day of April 2017): 27.59
P/E Ratio (on last day of March 2017): 26.82
Historical P/BV Ratios – Nifty 500 (Monthly Average)
P/BV Ratio (on last day of April 2017): 3.34
P/BV Ratio (on last day of March 2017): 3.25
Historical Dividend Yield – Nifty 500 (Monthly Average)
Dividend Yield (on last day of April 2017): 1.13%
Dividend Yield (on last day of March 2017): 1.16%
You can read the last month’s update here. The State of Markets section has also been updated with new Nifty heat maps (link). For detailed analysis of how much returns you can expect depending on when the investments have been made (at various P/E, P/BV and Dividend Yield levels), please have a look at these 3 posts:
Excellent one for patience one.
Thanks 🙂
Hi Dev,
This is great. I just recently came across your blog.
With very high PE 23.4 – I think we are heading into a danger zone.
I’m on sideline, just watching the market momentum everyday. I don’t watch stock price every now and then.
I’m a small investor…not very systematic though 🙂
what are your comments about the Economy right now?
I Feel, there is a lot of poster stories that runs in the media.
I don’t see any real growth. (Apart from Govt reforms to avoid subsidies and trying to keep the Govt’s balance sheet clean).
Listing the key sectors:
– Real Estate sector is clearly struggling from 2012.
– IT sector is going to struggle for next 2 to 3 years (short term)
Also, In future – The companies cannot grow as they did till now..
– Pharma is not going to do well with so many FDA warnings and bans. (short term)
– Agriculture is always struggling with poor rainfall and poor Govt infra investments for farmers.
– Manufacturing is on the slow growth lane.
– Auto and Auto ancillary is doing well
* This boggles me – reason – while all other Industries are performing low to mediocre – the people are spending/Lending more on Auto. This is still a risk factor for Lenders.
* I could see too much competition now in the market.
– Telecom — Competition is heating up now. we cannot touch these stocks for real returns next 1 year
– Banks
Worst of all the sectors and bad standards/practices.
Bad Loans are growing.
There is not Loan Growth or any growth Indicators.
More than Stocks, the Economy is what makes me to sit on the sidelines.
Appreciate the effort you put to keep this blog up to date.
All the Best!
Nice write up. I agree on all points. All said and done,the markets, apparently, have a mind of their own.
Drunk in sentiment, the market goes over and above its averages. I have often seen, that degree at which the market goes above the average, to the same degree it will go below. So, now if the market is overbought then in not too distant a future, it could possibly be that much oversold, which would be good news.
Agree with you Amit.
Hi Kumar
Those are some wise observations. The market clearly seem to be running ahead of the ground realities. But that’s how markets always are.
I am not capable enough to have an accurate view of the economy but generally speaking, I have concerns similar to yours. But in long run, I am fairly bullish (and my high equity allocation can vouch for that).
Now your thoughts remind me of an old quote by Graham. Though original quote is about better future prospects, I believe it can be changed slightly to reflect the opposite too:
Original Quote: “Obvious prospects for physical growth in a business do not translate into obvious profits for investors.”
Reversed Quote: “Mediocre prospects for physical growth in a business (or economy) do not (necessarily) translate into poor/mediocre profits for investors. 😉
The market is probably testing the patience of long term value investors. Since 2014 may (for 3 years) market did not go below 20 PE level (except for one month).
On the other hand if you take peak of Jan 2008, after 9 years the market returns are nothing.
So difficult to gauge, whether investors to rush in or stay out.
I prefer to go by my asset allocation rule and sleep peacefully.
Another observation from my own investment:
In Feb 2015, the PE Ratio was 23.2 and I redeemed partially from HDFC Equity fund at a NAV of 482Rs. and after more than 2 years the NAV now is 581 and the PE ratio is 23.4. Annual return (assuming it as opportunity loss, the loss was approx. 9% annually).
The redemption was reinvested in liquid fund at an NAV of 2737.51 and today’s NAV of the same is 3226.68 a return or a gain of of 8.04% annually (pre-tax) (against the above opportunity cost).
May be we shouldn’t depend too much on the data.
If we take 16000 value of sensex in 2007 October as Peak value (not Jan 2008 – 21,000 value), simply sensex has given hardly given 9% returns. In 2008, SBI fixed deposits for 10 years was yielding 10%.
Based on this comparison, the sensex on point to point basis sensex has hardly given fixed deposit returns (as index value) however many mutual funds delivered superior returns.
In my opinion and by personal experience, give enough time for the equity investments and keep investing regularly managing your asset allocation, you will end up better than any other financial investment.
Regards
Hi Ajay,
To continue your conversation, MFs outperform the index, because they churn their holdings; they sell the expensive and buy whats cheap, sectorwise. Buy and hold is nice and simple, but affects the performance a litle bit.
Hi Ajay
That’s a great example to show that one cannot fully rely on data. I think this can be used as case-study to play devil’s advocate for data-driven investing 🙂
hi Dev
great work very much useful
thanks
Om Agarwal
Thanks 🙂
Hi Dev,
I frequently visit your website and I must say that one the best eye-opening and sensible website and views. Your posts are amazing filled with useful quotes from many books/personalities.
I am also following State of market since one year and puzzled what should I do. (I am following you on continuing SIP and not making any new lumpsum investment.)
Wonderful website and views! Keep it on.
Rahul
Thanks Rahul. Happy to see that you find Stable Investor useful 🙂
I invested in various mutual funds in 2006/07 and the current valuations are 7 to 11 times their investment value. They significantly outperformed the sensex. Sensex had reached 10000 level during Feb 2006 and now its at 30000 which is 3 times.
I never touched my investments and did not follow the PE principles. But I wonder if i had done that whether my returns would have been even better. The PE multiples had moved between green and red at least 2 to 3 times during this period.
Please give your thoughts
7 to 11 times? Please share the fund names. Thanks in advance.
Where is the update for May?
Just published it. Thanks.