Rajandran R Founder of Marketcalls and Co-Founder Algomojo. Full-Time Derivative Trader. Expert in Designing Trading Systems (Amibroker, Ninjatrader, Metatrader, Python, Pinescript). Trading the markets since 2006. Mentoring Traders on Trading System Designing, Market Profile, Orderflow and Trade Automation.

What could Possibly Go wrong with Bank Nifty?

57 sec read

Historical PE-Ratio of Bank Nifty Since 2001

Here is the historical PE-Ratio of Bank Nifty. Recently there is a hockey stick growth in PE ratio of Bank Nifty. NIFTY Bank Index comprises of the most liquid and 12 large Indian Banking stocks from the Banking sector. Surprisingly top 3 constituents namely HDFCBANK, ICICIBANK & KOTAK Bank alone contributes to 65% of the weightage.

Current PE Ratio stands at 58.33 which is exponential and it is more than a double compared to 1st Jan 2018 PE ratio of Bank Nifty which stands at 26.98. Just in less than 20 months of time PE ratio skyrocketed. A high P/E suggests that investors are expecting higher earnings growth in the future and on the other side it also means kind of overbought levels from the investing timeframe perspective.

The current Total market cap of Bank Nifty Stocks comes around 17,68,885.10 Crores. Most of the exponential move comes from the year 2017 annual gains 41% which is quite phenomenal followed by 9% YTD gains during the year 2018 so far.

Bank Nifty – Top constituents by weightage

Just 3 private sector banks have an approximate weightage of around 65% in bank nifty. One of the reasons even wild swings in Public Sector banks almost have no impact in moving the Bank Nifty index. Since the start of the year 2018, Bank Nifty had gained 9.2%. However, PSUBank Index had lost 12.99%. Despite PSU Bank losing the majority of its gains post bank recapitalization, BankNifty managed to test All time high. However, PSU Bank Index is not.

Bank Nifty Top Stocks – 1 Year Peformance

So, What do you think? What could possibly go wrong this time? Is it different this time?

Rajandran R Founder of Marketcalls and Co-Founder Algomojo. Full-Time Derivative Trader. Expert in Designing Trading Systems (Amibroker, Ninjatrader, Metatrader, Python, Pinescript). Trading the markets since 2006. Mentoring Traders on Trading System Designing, Market Profile, Orderflow and Trade Automation.

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