Nifty 50 Analysis

This analysis has been brought about by three events that happened over the course of the past few months.

1. My final year thesis in college was on ‘The Significance of Benjamin Graham’s Value Investing Techniques in the Indian Stock Market’ The results of the research left a lot of questions unanswered some of which I have tried to address in this post.
2. A friend of mine currently pursuing law was convinced that Jindal Steel is a fair buy in the current scenario. His legal prowess dictates that Jindal will win the current cases dragging down Jindal’s share price. He however was uncertain of the price at which he should buy.
3. I have finally discovered a decent broker in RKSV with whom I shall finally start trading and wanted to screen the index for suitable buys

This post basically revolves around the philosophy of the father of value investing Benjamin Graham. Warren Buffett has sung his accolades since the time that he first read his books ‘The Intelligent Investor’ and ‘Security Analysis’

Graham originally suggested a total of seven criteria for picking stocks. He gives in addition to these criteria a rule of thumb. This rule of thumb is the Graham Number.

The Graham Number is the highest price that any defensive investor should pay for a stock. For the purpose of this post I have considered this number to be the intrinsic value of the stock.

The Graham Number is calculated as follows:

Data for the same has been sourced from and the earnings per share are the average earnings per share over a five year period. The index as stated earlier is the Nifty 50.

Now, all the Graham Criteria have not been applied together and hence, the intrinsic values for some companies may appear unreasonable. Rest assured I have cross checked these values and these have been calculated via excel.

Snapshot of Calculations made via Excel

Data regarding the 50 Companies is as follows:

The first 25 Companies

& now the next 25 Companies

Finally we have some winners

And now for some fancy charts

I think it’s fair to say that the Indian Stocks are highly overvalued as per Graham’s Number. That being said there are still a few good buys in the market.

Word of caution : Little knowledge is a dangerous thing. A single post should not determine your investment philosphy. Kindly think, research and then invest. I do not hold any of the stocks that are undervalued.

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