This is a good question and should be answered in the context of where we are in stocks and not just stock indices because mostly we do not invest in an index. Few chose index funds.
In 2017â€“2018 both large caps and midcaps were expensive and at that time the investment thesis was flawed, I know most did not agree but I knocked it back using this one chart. A chart of the relative strength of the Midcaps over Large caps that was at the top end of the range. Now the indicator is at the bottom end of the range and stocks have individually fallen by 50â€“80% as well.
So while it may appear that you are buying stocks expensive when you look at the Nifty at 12300 that might not be the case. Many stocks are again not so dear. The stocks in the Index that are still rising on high valuations are actually growth stocks and it is normal for them to command a premium. The Midcaps and Small caps that are now beaten down are Value stocks.
So is it a good time to invest at this index level? Better than it was 2 years ago. I cannot say there is never risk in the stock market. But based on an understanding of where you are in stocks you can assess relative risk to investing.
The above chart is featured regularly in the Long Short report published to Indiacharts Insiders.
The Truth About the Markets!