All investors know this important rule for investing in equity markets. In addition, that rule is that you should buy at low valuations and sell at high valuations in the market to make high profits or high returns on investments. Moreover, the ICICI pru equity valuation index will help you to know whether equity valuations are high or low.

But most investors are very confused about identifying the high valuations in Indian equity markets, i.e., nifty and sensex.

In addition, most of the time investors enter at high valuations and sell at low valuations.

In fact, they are selling their investments at losses after a heavy correction due to high valuations.

How will the Icici equity valuation index help your investment journey in the market? …

ICICI prudential mutual fund publishes the above equity valuation index every month in their monthly fact sheet.

In addition, you can see in the above chart that there are 4 colours highlighted from the top of the image to the bottom of the image.

And those colours are red orange, yellow, light green, and dark green.

Under Valuations…

Moreover, the dark green colour indicates that the equity markets are at low valuations; it’s a good time to invest aggressively.

In addition, all of you know that in 2008, Nifty fell, and everyone thought that Nifty would fall to zero.

But once Nifty entered this dark zone, it rallied all the way to 12000 levels from 2800 levels.

And as you can see in the above image, in 2008, the equity valuations entered the dark green zone.

Fairly valued…

Moreover, when equity markets are fairly valued, it is highlighted with light green in the above in the ICICE equity valuation index.

And at this level, you can start investing in equity.

Neural or right valuations…

Again, the yellow colour indicates that equity valuations are slightly overvalued.

And caution must be there. You should stop investing in equity here.

In addition, you should have a neutral view and should invest in equity or sell at this point.

Over Valued…

Again, the colour orange indicates that equity valuations are at higher valuations.

And you should decrease your equity exposure here and increase your debt exposure.

Very high valuations…

Finally, the red colour zone indicates that the equity valuations are very high.

And at this level, its better to sell all equity exposure or at least 80% equity must be sold at this level.

You can see 2007 equity valuations in the above image; at this level, all news channels are talking about sensex touching 1 lakh level.

But at these levels, the ICICI pru equity valuation index cautioned investors that valuations are at very high with red colour.

In addition to what happened in 2008, the nifty 50 corrected nearly 69% from its high.

What present nifty 50 levels are telling as per the ICICI equity valuation index? …

At present, nifty 50 valuations are in the orange zone of the ICICI equity valuation index.

So, its better to start decreasing equity market exposure at this level and start increasing debt exposure.

Conclussion…

If you are following fixed asset allocation, you can do rebalancing only when nifty 50 levels enter the orange zone and light green zone in the market.

In addition, if you are confident enough, you can take tactical calls like 70% equity in the light green zone and 30% equity in the orange zone based on the ICICI equity valuation index suggestions.

But before starting to do investments on your own, read this article about the wheel of life: Why you cannot do everything?…

And you should not forget to take a risk profiling test before doing asset allocation.

Read about asset allocation and its importance.

Also read about 6 asset allocation strategies. All you need to know…

And read about how to calculate the nifty 50 CAGR for the next 10 years…

Also read about Nifty 50 Future Prediction: The Best Way to Do…

And read about Nifty 50 level prediction 2025—all you need to know…

Also read about how to measure the volatility risk in the investment.

And read about top mutual funds to invest in 2025 – all you need to know…