Here are the latest Nifty valuations with long-term averages of PE, PB and Div Yield ratios along with ROE, rolling one-year EPS growth rate and dual moving averages obtained with the Nifty Valuation Analyzer.
The analyzer can be used to download Nifty price data automatically. Unfortunately, the NSE server is problematic and therefore the macro to get Nifty PE does not work. One has to manually update.
Note: The following is provided for information purposes. This is not a recommendation to follow these charts. The analyzer was made for those who wish to track market valuations with moving averages and ratios.
The use of average and standard deviation is not exactly justified for data sets which do not follow a bell curve. So please treat them as nothing more than a 'rough guideline'.
Why do investors time the market with DMAs and PE ratio? Is it to get better returns or better risk adjusted returns? More on this later.
Nifty PE with 150 and 363-day moving averages
Jim Otar suggests the following with two DMAs:
1) 5-month DMA (blue line)
2) 12-month DMA (red line)
Bearish trend: If the blue line goes below the red line, when the red line is heading south (red arrows below)
Bullish trend: If the blue line goes above the red line, when the red line is heading north (green arrows below). Read more: Moving Average Market Level Indicator.
So where are we now?! 🙂
Nifty PE with 10-year moving average and standard deviation bands
Notice how much the average has moved. The definition of what is 'high valuation' and 'low valuation' is changing with each passing day!
If one says, 'I will invest only if the PE value hits the 1st standard deviation band', notice how long he/she may have to stay away from the market: 2-3+ years!!
Nifty PB with 10-year moving average and standard deviation bands
The book value touched the 10Y moving average ~ Mar 2015 and fell and seems to be moving up again.
Nifty Div Yield with 10-year moving average and standard deviation bands
Notice how sharply the bands have moved down. Does this mean, the definition of a good dividend yield has changed sharply?!
Nifty EPS Growth rate (1-year rolling)
Now, what do we have here?! Have earnings finally started increasing?!
Nifty ROE or Book Yield
This is a measure of profitability. Notice that about a year ago, it fell sharply from values which were already low!
Outlook: I would like to believe that on the whole this is a 'good time' to invest. But then again, I also believe that any time is a good time to invest! I do not take these charts seriously. I made them because of curiosity and perhaps that it may be of some use to others. Use with ample caution.
Nifty valuation analyzer with rolling standard deviation Note: Nifty PE ratio has to be manually updated from the NSE site
Old version: Download the Nifty Analyzer
(This is a heavy file. Graphs will take a moment to display).