An employee walks past a signage for the CNX Nifty Index displayed on the National Stock Exchange of India Ltd. (NSE) building in Mumbai, India. (Photographer: Dhiraj Singh/Bloomberg)

Most Nifty Stocks Are Trading At A Premium

The NSE benchmark Nifty 50 may have lost nearly 10 percent from its lifetime high in January, but more than half the stocks on the index are still trading at a premium.

Fifty-eight percent of stocks on the Nifty were trading at a premium to their five-year average valuation, as per yesterday's closing. Telecom operator Bharti Airtel Ltd. commanded the highest premium – nearly 160 percent from its long-term average -- followed by consumer goods major Hindustan Unilever Ltd. and refiner Reliance Industries Ltd. The index itself was trading at a 5-10 percent premium from the long-term average.

Besides mid- and small-cap stocks, there are pockets in the Nifty which are expensive, said Harsha Upadhyaya, chief investment officer - equity at Kotak Mahindra Asset Management Company. He advises caution on the large-cap stocks which are trading at a premium. “If their earnings disappoint then we could see stocks fall further,” he said.

Among financial stocks, Bajaj Finance leads with a premium of 80 percent over its five-year average price-to-book ratio. The HDFC twins too are expensive compared to historical averages.

The stocks trading at 10-30 percent premium constitute a total weight of nearly 46-percent on the Nifty.

Most Nifty Stocks Are Trading At A Premium