Are Indian Stock Markets Overvalued?

Yes,I agree with the argument that Indian stock markets are overvalued at this
point of time.
Just a few days ago Nifty,the index of Indian Stock markets breached their all time

high values thereby creating joy for investors and traders alike.Many factors seem
to play a role
for this record setting spree.Firstly ,the victory of Emmanuel Macron in the first
round of the
French Presidential elections and secondly, the sweeping victory of Bharatiya Janta
Party in
Delhi civic polls.But one of the reasons for overvaluation of stocks would be their
PE ratios.
As you see the PE ratio of Nifty 50 seems to be moving towards its peak which
definitely
indicates that the Indian Stock Markets are overvalued.
PE ratio seems to say that market has moved ahead of its earnings growth.But PB
ratio clearly
tells us that there are ample of assets to back the prices.Currently assets might
be under
utilized thereby resulting in lower profits and ROEs.As the economy grows,demand
will increase
and assets would start getting fully utilized.Now is the time when investors have
to start looking
at their portfolios carefully and should be willing to remove companies with weak
balance sheets.
Thus one should look at both PB and PE ratio carefully before investing.Since if
all are high PE and PB
ratio companies then one should consider exiting these.
A company that trades at a price 50 times its earnings is most likely to be
overvalued.Hence
investors have to invest carefully and have to take a closer look at their
companies balance sheets.
Therefore a word of advice to all investors as quoted by Charlie Munger would be
"Move only when you
have an advantage.You have to understand the odds and have the discipline to bet
only when the odds are in
your favour."

2008 Nifty 50 Nifty 500

PE ratios 28 27
PB ratio 6.55 6.32

2017 Nifty 50 Nifty 500

PE ratios 23 27
PB ratio 3.48 3.27

ROEs are currently 14 to 15% as opposed to a long run average about 20%
Can move from midcaps to largecap funds or separate account portfolios as these
might be undervalued.