Understanding High Nifty P/E
Nifty50 index closed at 17,999.20 on 16th November 2021 and even after it is dropped more than 600 pts from high, the Price to earning ratio is still at 24.83 . This means buyers of nifty50 companies or index traders are ready to pay 24.83 multiple prices of their(Nifty 50 index constituents) earnings to buy the stocks or contracts. According to past events Nifty P/E considered being scary at these levels but how have situations changed for the Indian index this time? First, let's understand why and how the value of stocks increases! My Understanding- When an investor is generating X amount of returns but then with the passage of time high liquidity kept the price of equity higher and bond yield decrease, then the investor has to take more risk to generate the same returns and more returns to balance out lower yield returns and slow growth of their safe-haven assets after so much of inflation in the assets and that can be done by investing the amount into the higher risk as...