📊 Equity Risk Premium (ERP)
Are you being paid enough to take equity risk over government bonds?
Nifty PE Ratio
22.4
Earnings Yield (1÷PE)
4.47%
10Y G-Sec Yield
6.48%
ERP Spread
-2.01%
🔴 Bonds Clearly Better
What this means for investors:
A deeply negative equity risk premium of -2.01%. The bond market is offering substantially better yields than equity earnings. Historically, this level of negative ERP has preceded periods of muted-to-negative equity returns over the following 1-3 years.
How to read: Earnings Yield = 1 ÷ PE Ratio, converted to a percentage. When this yield exceeds the 10-year government bond yield, equities are theoretically compensating you for the extra risk. When it doesn't, you're taking equity risk for less return than a risk-free bond — a classic warning sign of overvaluation.
