The fair value of a stock is usually measured by : price-to-book value (P/BV ratio), price-to-earnings multiple (P/E ratio) and dividend yield (in percentage). A long-term investor would prefer a company with a lower p/e multiple and lower P/BV ratio.The key to find out whether it is cheap or expensive is to compare the current valuations with historical averages.
So, when comparing current ratios with historical averages of last quarters, most of the top index heavy weights are running ahead of fundamentals. The top 5 expensive stocks in Nifty right now are Reliance Industries, Tata Comm, BHEL, NTPC, HDFC Bank.
These stocks are fundamentally good stocks but running high now. So one can buy these stocks around their fair values, based on their historical averages.
Buy low, sell high !