Asian stock markets are trading on a mixed note after it was reported that the Federal Reserve is likely to deliver a hike in US interest rates and perhaps signal that as many as three more lie in store for the rest of the year. The Nikkei 225 is down 0.89% while the Hang Seng is up 0.34%. The Shanghai Composite is trading up 0.16%. Over the weekend, US stocks closed mostly in green.

Meanwhile, Indian share markets have opened the day on a flat note. BSE-Sensex is trading higher by 53 points and NSE-Nifty is trading higher by 20 points. S&P BSE Mid Cap is trading higher by 0.3% and S&P BSE Small Cap is trading up by 0.4%.

Gains are largely seen in capital goods stocks, consumer durables stocks and pharma stocks. The rupee is trading at Rs 64.87 against 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.

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.

The Warren Buffett Indicator Suggests Indian Equity Market Is Overvalued

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.

In news from energy sector, as per a leading financial daily, State-owned Indian Oil Corp (IOC) and Bharat Petroleum Corp Ltd (BPCL) may buy 26% stake each in gas utility GAIL India Ltd, paying the government over Rs 200 billion each to become integrated energy firms.

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