Indian share markets continued to rally in the afternoon session amid firm global cues after trade war worries eased last week. Gains were largely seen in software stocks, FMCG stocks and energy stocks.

The BSE Sensex is trading higher by 358 points and the NSE Nifty is trading up by 114 points. Meanwhile, the BSE Mid Cap index is trading up by 0.1% & the BSE Small Cap index is up by 0.2%. The rupee is trading at 65.08 to the US$.

The Market cap to GDP ratio for Indian companies 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.

The Warren Buffett Indicator Suggests Indian Equity Market Is Overvalued

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 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.

L&T share price was trading on an encouraging note (up 0.9%) after the company’s construction arm — L&T Construction — has bagged orders worth Rs 25.97 billion across various business segments.

The Transportation Infrastructure business has secured an order worth Rs 10.47 billion. The company has bagged a prestigious order has been received from the National Highways Authority of India (NHAI) for the construction of the 8.7 Km long Dwarka Expressway (Package – IV) in the state of Haryana on EPC mode.