The Indian Stock Markets have run up sharply from 8k to 12k, in a very short span of time. So too have many top index stocks. At current market prices, most frontline stocks are no longer cheaper and many are in overheated territory.
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 !
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 !
It is true that many stocks in nifty are currently overpriced.
ReplyDeleteI was never interested in the stock market and never really got around to understanding how it really worked. The basic buy low, sell high concept seems pretty simple and straightforward to me. But all the details, the stock history, market value, shares, etc really makes everything so much more complicated. I can see why people find this a real challenge though! Thanks :D
ReplyDelete