One of the Best Factor's to look into to evaluate of the Markets are overheated is the
Market Cap to GDP Ratio.
We take into account the Market Capitalization of BSE 500 which is like 90%+ of India's Listed Companies Market Cap. With the Sensex at 27,860 - BSE 500 Market Cap is Rs 90,99,313 Crores.
Now according to the
http://mospi.nic.in/ website, First quarter GDP of FY 2014-15 is Rs 28,42,596 Crore Source: ESTIMATES OF GROSS DOMESTIC PRODUCT FOR THE FIRST QUARTER (APRIL-JUNE) 2014-15
Based on the above two, the Market Cap to GDP Ratio = 90,99,313 / (28,42,596 * 4) = 0.800
During the Peak of 2007 Bull Run, the market Cap to GD had touched a Whopping 1.2 indicating over heated Zone. For Retail Investors, if this Ratio crosses 1, stay away from BUYING into the market.
