NSE Nifty P/E, P/B, Dividend Yield Yearly Chart
Nifty P/E Ratio
Nifty PE Ratio on 06-Dec-2013 is 18.58.
Nifty is considered to be in oversold range when Nifty PE value is below 14 and it's considered to be in overbought range when Nifty PE is near or above 22. The market quickly bounces back from the oversold region because intelligent investors start buying stocks looking to snatch up bargains and they do the exact opposite when Nifty P/E is in the overbought region.
Check out what Professor Bakshi (a famous Indian value investor ) has to say about Nifty P/E. Recent research done by my firm shows just how dangerous it is to remain invested in an expensive market. Since NSE started, every time when Nifty's Price/Earnings ratio exceeded 22, the average return from Indian equities over the subsequent three years became negative.
Source - sanjaybakshi.net
History clearly tells us that if you are a passive long term investor you should buy more units of Nifty Bees ETF when P/E falls below 14 and stop buying or buy fewer units of Nifty Bees when P/E goes above 22. Nifty Bees is an ETF which tracks the NSE Nifty Index.
Nifty P/B Ratio & Dividend Yield
Nifty P/B Ratio is 2.97 and Dividend Yield is 1.49 on 06-Dec-2013.
Nifty is considered to be in oversold range when Nifty P/B ratio is below 2.5 and it's considered to be in overbought range when Nifty P/B is above 4.
A long term investor should buy Nifty Bees as well as individual stocks when dividend yield crosses over P/B ratio to get maximum return from stock market. This is the point where Nifty is lowest which of course means that the so called "stock market gurus" on TV would be screaming gloom and doom messages about the world when the index reaches its lowest level.
To know more about intelligent investing - How to be an intelligent investor.
Data Source - NSE