As we can see above, NIFTY Auto moved up by 3.46%, but the PE ratio of the Nifty Auto has gone down by 3.68%. This essentially makes the Nifty Auto Index cheaper by around 4%

 

Within the NIFTY AUTO Index, some of the stocks are overvalued. Some of the stocks like TVS Motors and Bharat Forge are overvalued, trading at a PE ratio of over 60.

 

On the other hand, some of the Index heavyweights like M&M and Tata Motors are trading at a PE ratio of less than 25. These would be top picks for going long in NIFTY Auto Space.

 

April month would be eventful with results season kickstarting in April.

Some of the Indices like Nifty Consumer durables, Nifty Realty & Nifty FMCG are prices unreasonably high from a PE ratio perspective.

 

On the other hand, Indices like Bank Nifty, Nifty PSU bank and Nifty Financial services are cheaply priced. This clearly shows that the markets might take a “risk on” approach this month.

 

Top picks in Banking space will be Indus Ind Bank which is trading at comparatively cheaper valuations than its peers in private sector banking space.

 

In the PSU banking space, Canara Bank is the top pick for going long in the month of March. It is currently trading at the PE ratio of 6.98.

 

Further, public sector undertaking stocks have seen a stellar rally in the past few months. Despite the rally, the PSU stocks doesn’t look expensive. There might be a follow-up to buying these stocks if the results for the quarter are average enough.

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Nifty MIDCAP and NIFTY Small Cap

 

Investors need to be very careful in these sectors. Some of the stocks are showing clear signals of bubble formation. They are trading at some crazy valuations. Eg: Mahindra Lifespaces are trading at a PE ratio of 333

 

Below is the clustering of stocks constituting the NIFTY MIDCAP 100 Index. As seen in graph below, some of the stocks like Devyani, Dixon, Jubiliant Food, UBL, etc are trading at the PE ratio above 100