Indian share markets finished the trading session well above the dotted line, snapping a three-day falling streak amid firm Asian markets. At the closing bell, the BSE Sensex closed higher by 141 points and the NSE Nifty finished higher by 37 points. The S&P BSE Mid Cap finished down by 0.1% while S&P BSE Small Cap finished down by 0.2%.

Gains were largely seen in software stocks, FMCG stocks and energy stocks.

Asian stock markets finished broadly higher today with shares in Hong Kong leading the region. The Hang Seng is up 1.81% while China’s Shanghai Composite is up 0.45% and Japan’s Nikkei 225 is up 0.21%. European markets are lower today with shares in Germany off the most. The DAX is down 0.44% while France’s CAC 40 is off 0.25% and London’s FTSE 100 is lower by 0.10%.

Rupee was trading at Rs 64.81 against the US$ in the afternoon session. Oil prices were trading at US$ 61.19 at the time of writing.

The Market cap to GDP ratio for Indian companies too is close to dangerously high levels. While this is still some way off the peak of FY-08, when it had once reached close to 150, it’s relatively high.

FY17 saw this ratio reach close to 80. It is also expected to increase further given the moderate growth expectations in India’s GDP for FY18. Warren Buffett once considered this as one of the best valuation metrics to gauge the markets.

Past history shows some correlation between the ratio and the share market. 2008 saw Sensex decline by 38%, when this ratio crossed the 100 mark. Also, the market has bounced back sharply when this ratio was low.

The Warren Buffett Indicator Suggests Indian Equity Market Is Overvalued

The basic assumption in this ratio is that whenever the GDP of the country grows, the market performance will reflect it. Also, when stocks do well, it can be extrapolated to assume the Indian economy is doing well.