Almost two‑thirds of the stocks that make up India’s Nifty 500 index appear to be priced higher than their earnings justify.
Overview of the findings
A recent study by Omniscience Capital shows that roughly 65% of Nifty 500 constituents are overvalued. The index as a whole trades at about 24.4 times earnings (P/E), while earnings are expected to grow around 11% annually.
Valuation by market‑cap segment
- Large‑cap (top 100 companies): P/E around 22.8×, close to a reasonable range.
- Mid‑cap (ranks 101‑250): P/E about 28.1×, indicating higher valuation pressure.
- Small‑cap (below rank 250): P/E near 29.5× with expected earnings growth of 11.7%, suggesting they are the most overvalued group.
Sector‑wise outlook
The study points out a few sectors that still look attractive:
- Financials – the most reasonably priced sector.
- Utilities, Industrials, and Energy – also show favorable valuation relative to growth.
Conversely, Consumer Staples, Health Care, and Information Technology appear pricey compared with their projected earnings growth.
What this means for retail investors
- Be cautious with small‑cap stocks; their high multiples may limit upside.
- Consider focusing on large‑cap and financial stocks that offer more balanced valuations.
- Watch sector trends – financials, utilities, and energy may provide better risk‑adjusted returns.
Disclaimer
Remember, this is an overview of current market valuations, not a prediction of future price moves. Do your own research and consider your risk tolerance before making investment decisions.