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VIX auguring pain?

, July 23, 2012, 0 Comments

Appraising Nifty

Arriving at the fair value of any index is a tedious affair as compared to that of equity and hence some proxies or some thumb rules are used to ascertain whether the index is priced fairly or not. We have used Return on Equity (ROE) and earnings yield which is the inverse of Price Earning Ratio to gauge how Nifty is placed. Instead of using plain ROE and earnings yield for our analysis we have used difference between ROE and its average and difference between earnings yield and its average, respectively. The rally is sustainable when ROE is above its average and earnings yield is below its average but currently ROE is well below the average and earnings yield is close to the average and hence the market might remain subdued.