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Most Nifty Stocks Are Trading At A Premium

More than half the stocks on the Nifty 50 are still trading at a hefty premium.

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)
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)

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.

Most Nifty Stocks Are Trading At A Premium

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.

Most Nifty Stocks Are Trading At A Premium

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