BSE Small Cap Index Flying High - Chart Of The Day 12 April 2017 - Equitymaster

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BSE Small Cap Index Flying High
Apr 12, 2017

Professor Damodaran is very much clear on his thoughts when it comes to valuation. One simply cannot afford to overpay in the stock market.

Indian stock markets are at life time highs. In fact, the mid and small cap index has returned 31% in FY17, as against nearly 16% given by the S&P BSE Sensex and around 19% by Nifty.

Interestingly, many mid and small cap stocks have outperformed the index not only in last one year but have been on the winning streak from last 5 years.

With earnings not improving from quite some time now, the rise in the stock prices has led to unreasonable valuations. In fact, some of them are in a bubble phase right now. We believe, these stocks are vulnerable if there is any correction in the broader market.

My Colleague Richa, Managing Editor at Hidden Treasure is very cautious about the same. She is very skeptical about the current scenario with stock prices shooting up and earnings are near stagnant.

We too believe, in times like this, one need to be extremely disciplined about the businesses they are buying. Compromising on the quality of the business could prove fatal in these times.

Data Source: Ace Equity

This Chart Of The Day was published in The 5 Minute WrapUp - Professor Damodaran: Our Meeting with an Authority on Valuations

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