Motilal Oswal Value Index suggests markets are overheated


Motilal Oswal Value Index (MOVI), which helps gauge the equity market, has witnessed a volatile trend in Q4FY21.

Currently, the 30 day moving average is at 135 level and is suggesting that the markets are overvalued. The Index is calculated taking into account Price to Earnings, Price to Book and Dividend Yield of the Nifty 50 Index.

The current 30 Day moving average of MOVI falls in the highest MOVI band i.e 130 & above, indicating that markets are overheated.

A low MOVI level indicates that the market valuation appears to be cheap and one may allocate a higher percentage of their investments to equity as an asset class. A high MOVI level indicates that the market valuation appears to be expensive and that one may reduce their equity allocation

“In simple terms, MOVI index is a parameter which helps to gauge the direction of the market. One should allocate less to the equities, if MOVI bands are in the higher range and similarly increase the allocation if the MOVI bands are lower,” said Umang Thaker , Head of Products, MOAMC.

MOVI was accurate in gauging the direction of the markets, during a major crisis in the past.

Even during the recent phases, when markets turned volatile, MOVI was not only accurate in sensing the market movement but also agile enough to increase/decrease equity levels in time.