Measuring Equity Valuation Index(EVI)
Beware, don’t ask if the Stock Market in India is currently Bullish or Bearish. I say it is the time to invest. The Current brilliance is to make a small investment in selecting valuable Stocks and invest in those.
It is good for everyone to invest now rather than thinking based on Long term Investor or Short term Trader. Find out the real earnings and value of the listed companies and stick to invest in it.
Although there are so many fundamental analysis factors, these four important factors will tell the overall market situation in Stocks.
Even if you have already heard these factors, such things are very vital for the Long term Investment Strategy and it gives a bonus features on your Investing.
- Price to Earnings (P/E)
- Price to Book Value (P/B)
- G-sec X PE
- Market Cap to GDP(Gross Domestic Product)
One can know the Price to Earnings per share, as a basic level. We should not only consider the P/E of a stock or an industry, but for the Market Indices. Go to NSE India website and find out the P/E, P/B & Div Yield values or you can just google it Nifty Historical PE Ratios. So, it will give you an idea, what is the right time to invest in stocks.
One of my friend Mr. Dev Ashish, a SEBI-registered Investment Advisor has been posting regularly on his blog about Price to Earnings for the Market Indices – Nifty50 and Sensex.
You can also check out the Dividend yield value as comparing with the Price to Earnings and Price to Book Value. Multiplying the G-Sec (Govt. Securities) by the P/E Value is also another task to find the fair value of the current Market. You can compare the yield of Government Securities with the current P/E Value.
Analyzing and Comparing the Market Capitalization with the GDP(Gross Domestic Product) of a Country. If GDP in India is X, you can find out the Market cap of Indian Stock Market. Is Market cap is less than the GDP, now it is an opportunity to invest in Stocks.
Generally, if the Market cap value is higher than the GDP, then it is over valued. Otherwise the Market cap which is lower or very less than the GDP, it tells that the market has already fallen more. You can begin to invest aggressively in the Stock Market.
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