Asian stock markets are lower today as Japanese and Hong Kong shares fall on concerns about the US administration’s protectionist stance cast a shadow on financial markets. The Nikkei 225 is off 0.99% while the Hang Seng is down 0.31%. The Shanghai Composite is trading down by 0.14%. US stocks closed mixed in previous trading session.

Meanwhile, Indian share markets have opened the day on a negative note. BSE-Sensex is trading lower by 45 points and NSE-Nifty is trading lower by 13 points. S&P BSE Mid Cap is trading up by 0.1% and S&P BSE Small Cap is trading down by 0.1%.

Losses are largely seen in software stocks and realty stocks. Metal stocks and capital goods stocks witness majority of the buying momentum. The rupee is trading at Rs 63.64 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.

Indigo share price surged 2% in morning trade after the company reported a profit of Rs 7.62 billion in the quarter ended December 31, 2017, up 56.4% compared to Rs 4.87 billion in same period in last financial year.

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