I have found this relationship useful in gauging the overall level of the market and taking out the guesswork. The rationale is straightforward - the expected return from investing in the broad equity market should be in balance with what is implied by the current market situation.
10yr Bond yield + 5% = Earnings yield of the index + GDP growth
The 10 yr bond yield is 7.4%, The GDP growth is estimated to be 7.5% going forward as per CEA estimates. This gives us an implied PE of 20.4 . The PE after all earnings had been declared was 22.91 as on 14/11/2017 ( Nifty PE after all earnings have been declared ). Since then the Nifty50 has gone up by 8%. We will have to see the PE @diffsoft calculates post december results but i think it is a useful metric to know.
You can see the the equity risk premiums for various countries including india ( the 5% ) at
http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/ctryprem.html
Comments/Suggestions/Criticisms welcome
Thanks
Bheeshma