A Gap Down Opening, But What Next … ?
Last Friday, the Nifty Futures opened flat, traded flat and closed slightly in the positive territory on back of the strong gains in the stocks of the IT major TCS. The market has mostly been trading sideways for the past two days. Most equities are also trading sideways without any momentum, showing the symptoms of a top heavy market. Even though the FIIs were consistently on the buy side for the week, the market has not been able to takeoff.
The market seems to have hit the top end of the historical fundamental valuation levels achieved during normal bull market tops. ( Click here for an analysis of Nifty historical fundamentals and the Common Sense Guide to Nifty valuations ). The Historical P/E, P/B & Div. Yield values of S&P CNX NIFTY Index as on 16th July, 2010 are given in the table below. The P/E ratio of Nifty at 22.61 is at the top end of the high valuations range between the 20 to 23 range. In fact the Nifty valuation has remained between this range for the first six months of the calender year.