P/BV Ratio Analysis of Nifty in 2015 (Since last 16+ Years)

In continuation of the last post about P/E Ratio Analysis of Nifty since 1999, here is a similar analysis of Price–to-Book-Value Ratio. Like PE Ratio, I have been regularly tracking this 2ndindicator to gauge overall market sentiments at the State of Indian Markets on a monthly basis.

The data once again has been sourced from NSE’s website (link 1 and link 2) and starting from 1st January 1999. Ratio related data prior to this period is not available. So here is the result of the analysis…

The table above clearly shows that if one is investing in markets where P/BV < 3.0, returns over the next 3, 5 and 7 year periods have been in excess of 20%… i.e. 26.3%, 26.9% and 21.4% to be precise. On the other hand if investment is made when index P/BV exceeds 4.5, the returns have been quite unacceptable at 3.3% and 5.7% for 3 and 5 year periods.

Like we saw in previous post, this clearly indicates that when investments are made at high P/B levels, chances of sub-par (and even negative) returns increase substantially.

For your information, currently Nifty is trading at P/B Ratio of 3.8

But here is another interesting thing which can be observed. Even at a costly PB>4.5, if an investor stays invested for more than 7 years, then average returns are still a very decent 9.6%. And this shows that longer you stay invested, higher are the chances of making money in stock markets….even if you have entered at higher levels (Caution: I am talking about index investing here and not individual stocks).

Below are three graphs to provide details of the exact Returns against the exact P/B on a daily basis (though arranged with increasing PB numbers).

The left axis shows the P/B levels (BLUE Line) and the right axis shows the Returns (in %) in the relevant period (Light Red Bars)

All three graphs clearly show that there is an inversecorrelation between P/B Ratio and returns earned by the average investor. Higher the P/B Ratio when you invest, lower the expected rate of return going forward.

After P/E Ratio Analysis and this post on P/B Ratio Analysis, next I will be sharing my findings on a similar analysis for Dividend Yield of Nifty for last 16 years.


  1. Good analysis. But if longer holding gives you higher returns as in P/BV being between 3 to 4.5 or >4.5, why is the same formula not applicable to <3 - returns over 7 years are lower?

  2. Past PE seems to be more reliable ratio than PBV of the index. The range of PBV of the index seems to have come down over the years. The market is not giving the same PBV as it was giving in the past decade. It may happen to PE also in future. For the time being, still the average PE is more reliable data to rely upon.

  3. Dev.. I think you need to narrow the P/BV ratio intervals and publish the results. Like 2.8 to 3, 3 to 3.2, 3.2 to 3.4 … I think this will be even better. Anyway thanks for the great work.

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