Rajandran R Creator of OpenAlgo - OpenSource Algo Trading framework for Indian Traders. Telecom Engineer turned Full-time Derivative Trader. Mostly Trading Nifty, Banknifty, High Liquid Stock Derivatives. Trading the Markets Since 2006 onwards. Using Market Profile and Orderflow for more than a decade. Designed and published 100+ open source trading systems on various trading tools. Strongly believe that market understanding and robust trading frameworks are the key to the trading success. Building Algo Platforms, Writing about Markets, Trading System Design, Market Sentiment, Trading Softwares & Trading Nuances since 2007 onwards. Author of Marketcalls.in

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 Creator of OpenAlgo - OpenSource Algo Trading framework for Indian Traders. Telecom Engineer turned Full-time Derivative Trader. Mostly Trading Nifty, Banknifty, High Liquid Stock Derivatives. Trading the Markets Since 2006 onwards. Using Market Profile and Orderflow for more than a decade. Designed and published 100+ open source trading systems on various trading tools. Strongly believe that market understanding and robust trading frameworks are the key to the trading success. Building Algo Platforms, Writing about Markets, Trading System Design, Market Sentiment, Trading Softwares & Trading Nuances since 2007 onwards. Author of Marketcalls.in

Is the Market Overheated? – Market Profile Analysis on…

Nifty Futures have been on an impressive run, hitting new highs after recovering from the election day crash. However, recent price action and market...
Rajandran R
1 min read

Political Shocks and Market Crashes: Lessons from Argentina for…

In an unexpected turn of events, the Indian stock market experienced a dramatic crash today following the announcement of the Lok Sabha election results....
Rajandran R
1 min read

Navigating Volatility Ahead of Final Election Results

As the Indian market approaches the final election results on June 4, 2024, volatility has been a key feature of market behavior. This period...
Rajandran R
1 min read

Leave a Reply

Get Notifications, Alerts on Market Updates, Trading Tools, Automation & More