Another Gap Down !
This blog had repeated time and again that Nifty valuations were stretched, and now, it seems that market is in the process of clipping the same. As the market has been pricey for a very long stretch of time and most market participants became used to the higher valuations, the present correction may appear to be very deep. However, it remains to be said that the trailing valuations have just fallen to the long term averages now. It is a very simple matter that the long term averages are supposed to be somewhere in the middle of the valuation ranges and therefore, at least for half the period used to calculate the averages, the index valuation have remained below the long term averages. Therefore, there is no such near limit at which the fall may get arrested. But, it is a fact that market has become comparatively safer for long term investors for they can buy at somewhat reasonable prices from now on and this itself may provide a bit of margin of safety and long term upside.
Nifty Trailing Fundamentals
The trailing Price Earnings Ratio ( PE Ratio ), Price to Book Value ( PB Ratio ) and Dividend Yield ( DY Ratio ) of the Nifty Index were at 17.85, 2.92 and ( 00 )* respectively as on 17th August 2011. ( More information and a long term analysis on Nifty historical valuation are available from the "Nifty Fundas" page ). * Please note that the latest D/Y is not updated due to some technical problems with the source NSE website.
