Caution alert from Buffett indicator

Hyderabad: Had Buffett Indicator, which measures India’s market capitalisation-to-GDP, predicted market crash? The answer seems to be yes as Buffett Indicator showed mcap-to-GDP ratio over 150 level, which is highly unusual as any level above 100 is considered to be expensive.

However, market analysts say Indian capital market’s PE of 24 is justifiable with the valuation observed in most parts of the last 10 years during Modi government. But Buffett Indicator had signaled that equity market based on the real economy at excessively high level. Sensex P/E ratio was 23.85 level on Monday. The latest Economic Survey also warned that it’s a harbinger of market instability rather than market resilience. Billionaire investor Warren Buffett says the percentage of total mcap-to-GDP is the best single measure of where valuations stand at any given moment.