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How to Know if an Index or Stock is Trading at Correct Valuation?

Posted By On 5/25/2009 03:23:00 PM Under ,
1. One of the criterions for determining if the stock or an index is trading at high valuations or low valuations is to use the P?E ratio.

2. This approach is being explained you with a chart of Nifty (an Indian index for National Stock Exchange which is having highest turnover in world in Futures segment) and one will apprecaite the accuracy of this trading tool. Thus if we see that if Nifty is trading above the value of 24 than the index is trading at high vluations and thus a reversal can take place from these values.

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