State of Indian Stock Markets – June 2016

This is the monthly update of the state of Indian stock markets. As of now, it comprises only of an analysis of Nifty50‘s ratios, namely P/E, P/BV ratios and Dividend Yield.

But before that, lets see what happened in June 2016, which was a month of exits.

RBI Governor Raghuram Rajan said No to a second term and instead, has decided to return to academia (lucky him!) after his term ends in September. Read his address to RBI staff here.

People termed it as Rexit (= Rajan + Exit). I am a fan of Mr. Rajan for his sensible views and how he took a tough approach towards cleanup of PSU banks. Personally I think that having him around with the current PM in driver’s seat, would have been great for the economy. But life moves on and so will the Indian economy.

Then people of Britain decided to do a Brexit (= Britain + Exit) from the European Union (EU).

In short term, Indian markets were expected to react negatively to the news of Rexit. But that did not happen. Tells how brutal the markets can be towards people’s expectations. 🙂 As for the Brexit, there was a knee-jerk reaction when indices fell more than 2% in a day (might look like a big drop in short term but is nothing when long-term is considered). Some stocks whose business is dependent on British and European economy, witnessed far deeper one-day cuts. But markets seem to have recovered since then. Experts are still trying to predict the consequences of Brexit. But no on seems to be sure about the actual impact. Whether it will result in a mild recession in UK or whether government will eventually disregard people’s verdict in referendum and stay back in EU – no one knows anything.

Coming back to the state of our own markets…

The numbers are averages of P/E, P/BV and Dividend Yield in each month. The heat maps don’t show the maximum and minimum values of each month.

Caution – Please remember that relying solely on averages can be risky. Its like a 6-feet person drowning in a river which had an average depth of 4-feet. 🙂

Don’t make any investment decisions based solely on just one or two ‘average’ indicators. At most, treat these heat maps as broad indicators of market sentiments.

So here are the Heat Maps…

P/E (Monthly Average)
Price to Earnings Nifty June 2016

P/E Ratio (on last day of June 2016): 22.75
P/E Ratio (on last day of May 2016): 22.60

P/BV (Monthly Average)
Price to Book Nifty June 2016
P/BV Ratio (on last day of June 2016): 3.37
P/BV Ratio (on last day of May 2016): 3.40

Dividend Yield (Monthly Average)
Dividend Yield Nifty June 2016
Dividend Yield (last day of June 2016): 1.25%
Dividend Yield (last day of May 2016): 1.32%

You can read about last month’s update hereThe State of Markets section has also been updated (link).

For detailed analysis of the relation between investments made at various P/E, P/BV and Dividend Yield levels and the historical returns, please have a look at these 3 posts:

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  1. Thanks for the summary of the markets. The map you have made is very clear indicator in general what to do with markets.

  2. Thanks for your blog , which gave me a lot of information and made me to make a good choice of investment.

    I am fan of ur blog !

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