Nifty at the 78th Valuation Percentile: What History Says Next
Ten years of forward-return data conditioned on entry valuation. The distribution is wider than the averages suggest.
The index sits near the 78th percentile of its ten-year forward valuation range. We condition subsequent one, three and five-year returns on entry valuation and publish the full distribution rather than the average, because the average conceals almost everything that matters.
- Current percentile
- 78th
- Sample period
- 10 yrs
- Median 3yr
- +4.8%
- P10 – P90 spread
- 21pts
Key findings
- The median outcome is modest, not negative
Entering at this percentile has historically produced positive but below-average medium-term returns. The distribution does not support a bearish conclusion on valuation alone.
- The dispersion is the story
The spread between the tenth and ninetieth percentile outcome is wide enough that the median is a poor guide to any individual path.
- Valuation has near-zero one-year predictive power
Conditioned returns only separate meaningfully at horizons beyond three years, which is an argument about position sizing rather than about market timing.
Annualised three-year returns, percentage points. Sample data.
Method
We take rolling forward-earnings multiples over the past decade, rank each observation into percentile buckets, and record subsequent returns at one, three and five years. The sample is small at the extremes and we flag that in the model rather than smoothing it away.
Every observation is available in the attached workbook, including the periods that weaken the relationship.
What this does and does not justify
It justifies a modest reduction in incremental deployment pace and a preference for names where valuation is not doing the work. It does not justify exiting equity exposure, which the distribution does not support at this percentile.
It also argues for widening the range of outcomes you plan for rather than shifting the central case, which is a different and less satisfying conclusion than most valuation notes reach.
Where this reading changes
A move above the ninetieth percentile would materially shift the conditional distribution and warrant a stronger conclusion. So would a break in the earnings revision breadth that currently supports the multiple.
We publish this percentile reading with every monthly outlook so the trajectory is visible rather than reconstructed after the fact.
Download the full report and model
18-page PDF plus the three-statement model as an editable spreadsheet. Change an assumption and see what the answer becomes.
Downloads are available to subscribers on the Professional and Premium tiers. Demo links on this build are inactive.
Strategist · SkyGrowthWealth Research
Maintains the model behind this note and publishes every revision to it.
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