IDEAS home Printed from
   My bibliography  Save this article

Investigation of overvalued and undervalued stocks: the case of BSE Sensex


  • Shraddha Mishra
  • Raj Kumar


Concerns with overvaluation and undervaluation in financial markets are the focus of behavioural economics and finance (Barberis and Thaler, 2003). The prime objective of the paper is to analyse the valuation of the stocks in the market. There are two giant indices in Indian stock market, i.e., Bombay Stock Exchange and National Stock Exchange (BSE % NSE). We refereed BSE index for the study because of the higher market capitalisation to gross domestic product (GDP) ratio as compared to NSE index. The period of the study is five years from 2009-2013. The top 20 companies listed at BSE on the basis market capitalisation as of 31 March 2013 have been chosen. Due to data inadequacy, two companies namely Coal India Ltd. and Cairn Ltd has not been considered. The study concludes that out of 18 companies, seven are overvalued, whereas, 11 are undervalued. It has also been observed that overvalued companies are the kings of their respective industry and they are retrieving the benefits of their leadership from the market. Finally, the study reveals that the Indian stock market is moderate and efficient in nature.

Suggested Citation

  • Shraddha Mishra & Raj Kumar, 2016. "Investigation of overvalued and undervalued stocks: the case of BSE Sensex," International Journal of Business Excellence, Inderscience Enterprises Ltd, vol. 10(2), pages 177-189.
  • Handle: RePEc:ids:ijbexc:v:10:y:2016:i:2:p:177-189

    Download full text from publisher

    File URL:
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    1. Ming Dong & David Hirshleifer & Siew Hong Teoh, 2012. "Overvalued Equity and Financing Decisions," Review of Financial Studies, Society for Financial Studies, vol. 25(12), pages 3645-3683.
    2. Frankel, Richard & Lee, Charles M. C., 1998. "Accounting valuation, market expectation, and cross-sectional stock returns," Journal of Accounting and Economics, Elsevier, vol. 25(3), pages 283-319, June.
    3. John Y. Campbell & Samuel B. Thompson, 2008. "Predicting Excess Stock Returns Out of Sample: Can Anything Beat the Historical Average?," Review of Financial Studies, Society for Financial Studies, vol. 21(4), pages 1509-1531, July.
    4. Ron Bird & Krishna Reddy & Danny Yeung, 2014. "The relationship between uncertainty and the market reaction to information: Is it influenced by stock-specific characteristics?," International Journal of Behavioural Accounting and Finance, Inderscience Enterprises Ltd, vol. 4(2), pages 113-132.
    5. Fama, Eugene F. & French, Kenneth R., 1989. "Business conditions and expected returns on stocks and bonds," Journal of Financial Economics, Elsevier, vol. 25(1), pages 23-49, November.
    6. Nasrin Alinghian, 2014. "Evaluation and prioritisation of dividend payment factors in Tehran Stock Exchange: a logit model approach," International Journal of Business Excellence, Inderscience Enterprises Ltd, vol. 7(5), pages 646-658.
    7. Chen, Joseph & Hong, Harrison & Stein, Jeremy C., 2002. "Breadth of ownership and stock returns," Journal of Financial Economics, Elsevier, vol. 66(2-3), pages 171-205.
    8. Leppin, Julian Sebstian, 2014. "The Relation Between Overreaction in Forecasts and Uncertainty: A Nonlinear Approach," Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100284, Verein für Socialpolitik / German Economic Association.
    9. Abdullah Alkarashi & Mark Rajai & Kouroush Jenab, 2014. "The economic efficiency analysis of Saudi Arabia," International Journal of Business Excellence, Inderscience Enterprises Ltd, vol. 7(5), pages 565-576.
    10. David Hirshleifer & Sonya S. Lim & Siew Hong Teoh, 2011. "Limited Investor Attention and Stock Market Misreactions to Accounting Information," Review of Asset Pricing Studies, Oxford University Press, vol. 1(1), pages 35-73.
    11. Fama, Eugene F. & French, Kenneth R., 1988. "Dividend yields and expected stock returns," Journal of Financial Economics, Elsevier, vol. 22(1), pages 3-25, October.
    Full references (including those not matched with items on IDEAS)


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ids:ijbexc:v:10:y:2016:i:2:p:177-189. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Carmel O'Grady) The email address of this maintainer does not seem to be valid anymore. Please ask Carmel O'Grady to update the entry or send us the correct email address. General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.