Indian share markets rose in today’s session after seven consecutive sessions of declines. At the closing bell, the BSE Sensex closed higher by 330 points and the NSE Nifty finished higher by 100 points. The S&P BSE Mid Cap finished up by 1.8% while S&P BSE Small Cap finished up by 2.3%.
Gains were largely seen in realty stocks, capital goods’ stocks and pharma stocks.
Asian stock markets finished mixed as of the most recent closing prices. The Nikkei 225 gained 1.13% and the Hang Seng rose 0.29%. The Shanghai Composite lost 1.43%. European markets are lower today with shares in Germany off the most. The DAX is down 0.89% while London’s FTSE 100 is off 0.55% and France’s CAC 40 is lower by 0.48%.
Rupee was trading at Rs 64.16 against the US$ in the afternoon session.
Oil prices were trading at US$ 61.42 at the time of writing.
The Market cap to GDP ratio for Indian companies too 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.
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 Warren Buffett Indicator Suggests Indian Equity Market Is Overvalued
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.
Cipla share price surged 7.8% after it reported a 4.8% growth year-on-year in profit at Rs 4 billion in Q3FY18. The growth was largely supported by better-than-expected operational performance and tax reversal but restricted due to lower other income. Profit in year-ago quarter stood at Rs 3.9 billion.
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