Market Capitalisation (M-CAP) to GDP Ratio : The stock market capitalization-to-GDP ratio is a ratio used to determine whether the overall market is undervalued or overvalued compared to a historical average. As pointed by Warren Buffett, M-CAP to GDP is “probably the best single measure of where valuations stand at any given moment”. The result of this ratio calculation is the percentage of GDP that represents stock market value. The Ratio for Sensex is currently stands at 54%, way below its historical mean of 69%. This ratio is at its lowest level since 2010 – an outcome of the flash crash seen in the last 22 odd trading sessions.
If we look at Nifty, on financial year basis this ratio stands at 49%, again lowest since the global financial crisis.