One can compare Nifty PE ratio chart and Nifty PB ratio chart values to get a fair idea about market valuation leading to buying and selling decisions. P/B of 2 or lower signifies that Nifty is significantly undervalued (Ample opportunity to go long) and P/B of greater than 4.5 signifies Nifty is highly overvalued (Opportunity to book profit). Nifty P/B ratio of around 2.75 to 3.25 is considered fair as far as market valuation is concerned (Opportunity to hold). So as the Nifty PB ratio goes up, the valuation gets expensive and vice versa. This means that on average, the Nifty 50 companies are valued as much as three times than what is actually present in their books. Just to understand what Nifty PB ratio means, let’s say the current Nifty P/B multiple is 3. Normally, the Nifty P/B ration value remains between 2 and 5 (It crossed 6 in 2008 - A sign of the highly overvalued market - See the Nifty PB chart). तोह दुःख काहेको होय What is Nifty PB Ratio?Īs with Nifty PE ratio, investors can also investigate Nifty PB ratio to gauge if the market is undervalued or overvalued. Based on historical data and pure common sense, investors can safeguard their investment portfolio and earn handsome profit by following the investment rationale suggested in following table. Whether the index is cheap or pricey should be judged on the basis of its PE ratio rather than the value. Nifty at 8900 and Sensex at 29000 are merely numbers and one needs to take EPS of all the constituent stocks into consideration before making an investment decision. Investors should not judge nifty index or sensex by its value. It's clear from the chart above that stock market witnesses a sharp sell off when nifty pe is near 25 and witnesses heavy buying when nifty pe ratio is round 12 to 15. When Nifty PE ratio is at its peak (in the range of 25 to 30), nifty is also at its peak and vice versa. The same can be depicted from studying the Nifty PE vs Nifty chart above. A high Nifty PE multiple on the other hand is assumed to be expensive and warrants caution while taking investment decisions (Booking profit or going short is a better strategy than going long in High PE ratio scenario). Today it refers to an index on Indias stock exchange. From long term perspective, low Nifty P/E ratio is considered cheap and ideal for going long. The Nifty 50 was a group of the most popular large-cap stocks on the NYSE in the 1960s and 1970s. Nifty PE ratio is important as it is a measure of valuation of all the companies included in Nifty. Nifty PE analysis with Nifty PE Ratio vs Nifty Chart
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