Valuations of stocks narrows down between BSE Sensex and broader market

New Delhi: With the BSE Sensex hitting new high on Monday, broader market has come into existence, trend moving from front-line stocks, for the traders. Keeping with the trend, premium has also shrunk between Sensex and indices of the broader market if we track them since the ongoing fiscal year has begun.Valuations of stocks narrows down between BSE Sensex and broader market

One-year price to earnings (PE) multiple of the BSE Sensex was 14.38 and 12.36 respectively on April 1. PE was 9.42 for BSE Small-cap indices.

It expanded to 16.91 on August 18, but the BSE Mid-cap index has risen at 17 and BSE Small-cap index at 14.38.

It would be no exaggeration to call it a “cyclical recovery.”

Mid-cap and small-cap stocks have seen a considerable revival in the recent weeks and rally is observed at 30 per cent and 42 per cent respectively since the running fiscal year saw its start.

With the NDA government sending strong signals of growth hopes, investor appetite has increased.

With the hot money flowing in the mid-cap and small-cap from developed markets here is a perfect opportunity to make quick money.

As per equity experts, even mutual funds, retail investors and FIIs are investing in certain mid-cap and small-cap stocks only but with short or medium term perspective.

However, it has been observed that capital goods, infrastructure, PSU (public sector units) banks and realty sector has seen stock value plummeting despite aggressive buying. The reason behind is that until reforms are not put on ground in real, stocks will remain over-valued and fundamentals weak.

Ashish Pandey

I am a business and finance journalist who is currently employed at Financial Express and previously at Zee News. My areas of interest include business and foreign policy. You can reach me on Twitter at @ashuvirgo1984 or @eFundsPlus.

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