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As India crosses $3 trillion m-cap, Warren Buffett indicator falls. Is it a sign of caution?

Experts point out that the Buffett indicator is widely followed and works well in most economies, but India has its unique characteristics.

May 26, 2021 / 04:31 PM IST

The market-capitalisation (m-cap) of BSE-listed firms has topped the $3 trillion mark, making India the world's eighth-largest stock market after the US, China, Hong Kong, Japan, UK, France and Canada.

Among all significant developments in the market's journey to the $3 trillion mark, the m-cap to GDP ratio has seen a significant jump to 97 percent since FY04, which is higher than the average of 77 percent for the period but lower than the peak of 149 percent of GDP in 2007, according to a report by Motilal Oswal Financial Services.

The Buffet indicator is an important indicator that shows whether the market valuation is in sync with the economic reality or not.

The Warren Buffett indicator, as per Motilal Oswal, has come down from 105 in FY21 to 97 in FY22.