The Nifty 50’s valuation reset has pushed its price-to-book ratio below 3 times for the first time in nearly six years. But investors looking for a broad market bargain may still be too early as earnings-based valuations remain above historical norms, making further gains increasingly dependent on profit upgrades rather than another rerating.
The index traded at 2.95 times book value on July 27, compared with 2.99 times on Dec. 4, 2020, according to DSP Asset Managers’ Netra report. The comparison is more favorable today as Nifty’s implied return on equity has risen to 14.5% from 11.8%, while its price-to-earnings ratio has declined to 20.5 times from 25.34 times.
