Market Cap to GDP Ratio

Sometimes called the Buffett indicator, the ratio compares the value of listed equity against the size of the economy that produces its earnings. Its central weakness is that the numerator and denominator are not measuring the same universe: listed companies are not the whole economy, and their profits can include substantial foreign earnings. Structural changes such as more companies listing, or profits shifting toward listed firms, raise the ratio permanently without indicating overvaluation. India's ratio has moved through a wide range over the decades, and no level of it predicts returns, which this dictionary does not suggest it does.