Sensex, Nifty Trade Lower; Energy & Metal Stocks In Red

Indian share markets continued to trade on a weak note during the noon session. Losses were largely seen in PSU stocks, metal stocks and energy stocks.

The BSE Sensex is trading lower by 150 points and the NSE Nifty is trading down by 62 points. Meanwhile, the BSE Mid Cap index is trading up by 0.1% & the BSE Small Cap index is down by 0.1%. The rupee is trading at 64.96 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.

In news from pharma sector, as per an article in The Livemint, Torrent Pharma Ltd is likely to raise at least Rs 15 billion by selling shares to institutional investors, as it prepares a bid for the generic drugs unit of France’s Sanofi. Torrent Pharma is readying a €2 billion (Rs 160 billion) binding bid for Sanofi’s unit Zentiva NV

The proposed fundraising will help the pharma company strengthen its balance sheet as it looks to absorb yet another major asset.

Earlier during the month, Torrent told that its shareholders had approved raising as much as Rs 50 billion of equity capital through a qualified institutional placement (QIP) and other routes.