Financial sector drags down Nifty's P/B value below historical average

Index trading at price-to-book ratio of 2.9x, compared to 20-year average of 3.5x

With the Nifty going past 10,000 points recently, the price-to-earnings (P/E) multiple has again become expensive. However, market players appear to be taking comfort in the fact that the price-to-book (P/B) value — another parameter to gauge market valuation — is at 2.9x, much lower than its 20-year average of 3.5x. This makes the broader market a value-buy at current levels, say experts. 

“The P/B value is a better valuation parameter during economic or financial distress that results in a sharp fall in earnings, followed by a quick rebound,” says Dhananjay Sinha, director (research), Systematix Institutional Equity.

The P/B ratio entered the