Indian share markets continued to trade on a weak note during the noon session amid weak Asian markets. Losses were largely seen in metal stocks, oil & gas stocks and auto stocks.

The BSE Sensex is trading lower by 360 points and the NSE Nifty is trading down by 122 points. Meanwhile, the BSE Mid Cap index is trading down by 1.1% & the BSE Small Cap index is down by 1.3%. The rupee is trading at 65.22 to the US$.

The Market cap to GDP ratio for Indian companies is close to dangerously high levels. While this is still some way off the peak of FY-08, when it had once reached close to 150, it’s relatively high.

The Warren Buffett Indicator Suggests Indian Equity Market Is Overvalued

FY17 saw this ratio reach close to 80. It is also expected to increase further given the moderate growth expectations in India’s GDP for FY18. Warren Buffett once considered this as one of the best valuation metrics to gauge the markets.

Past history shows some correlation between the ratio and the share market. 2008 saw Sensex decline by 38%, when this ratio crossed the 100 mark. Also, the market has bounced back sharply when this ratio was low.

The basic assumption in this ratio is that whenever the GDP of the country grows, the market performance will reflect it. Also, when stocks do well, it can be extrapolated to assume the Indian economy is doing well.

In news from banking sector, India’s state-owned banks have written off Rs 5.16 billion worth of bad loans owed by willful defaulters in the first half of fiscal year 2017-18 (H1 FY18).

As per the finance ministry data, 38 loan accounts of willful defaulters were written off the books of banks during April-September period of FY18.

Write-off in banking parlance means that the bank has made 100% provision from its earning against that account. Following this, non-performing asset (NPA) is no longer part of its balance sheet. However, the write-off puts pressure on bank’s balance sheet as it erodes operating profit.