Updated on 29 May 2017
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Nifty and Sensex at all time high but other ratios are not
The ongoing rally in the benchmark indices has reminded market participants of the euphoria of 2007. The Sensex crossed 31,000 for the first time ever, while the Nifty visited 9,600 briefly on Friday.
It was in 2007 that the Sensex crossed 30,000 for the first time. In addition to the index levels, there is a resemblance in stock valuations, measured by price to earnings (PEs) between the two periods, but a lot of the similarities end there.
A look at economic and corporate earnings parameters shows the stark contrast between the two periods. For instance, the Indian stock market capitalisation to GDP ratio was 149% in 2007, while it's 98% now. Price to book was 5.7 in 2007 while it's 2.95 now.
Nifty heavyweights like RIL, HDFC Bank, HDFC, Infosys and ONGC are currently trading much lower than their January 2008 valuations in terms of price to earnings. Analysts say the constant flow of liquid.