Buffett Indicator: During the Corona epidemic, there was a stampede in the markets around the world and the markets had collapsed. After recovering from this, the stock market reached new heights. However, some experts are apprehensive about this rise that according to the speed in the market, the correction can be seen accordingly. Before investing in the stock market, market experts use some methods to predict the movement of the market. One such method is the Buffett indicator, which indicates whether the market is overvalued, fairvalued or undervalued.
The Buffett indicator is a way to measure market movements. Legendary investor Warren Buffett proposed it nearly 20 years ago and said that it is probably the best way to measure the market price at any given time. According to this indicator, the bullishness of the Indian stock market is intimidating, that is, a sharp correction can be seen in it.
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Buffett Indicator giving alarming signal
The Buffett indicator is the ratio of the market cap to GDP ratio. It is expressed in percentage. At present it is at 118.24 per cent which is overvalued. The Buffett indicator is expressed in another way. In this, the ratio of market cap and GDP and total assets of the central bank is calculated. However, in this manner also the Buffett indicator for the Indian stock market is 102.86 percent which is overvalued.
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Higher the indicator means the price is expensive
A higher Warren Buffett indicator means that the value of Indian stocks has become higher and in comparison to this, GDP growth and earnings of companies are slow. When Buffett mentioned it in an article in a business magazine ‘Fortune’ on September 10, 2001, he said that it is the best way to measure the movement of the market. According to Buffett, if the market cap and the percentage ratio of GDP is between 70-80%, then there is a better opportunity to buy stocks, but when this ratio reaches more than 200 percent, then investing in stocks at such a time is like playing with fire. .
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