New Delhi, Aug. 4 -- One of the most closely watched long-term market indicators is flashing a signal that Indian equities may be trading at attractive valuations relative to gold.

The Nifty 50-gold ratio has narrowed further to 1.70, suggesting the stock market is oversold and equities are deeply undervalued compared with gold. The ratio, calculated by dividing the Nifty 50 index by the price of one gram of gold in India, serves as a long-term gauge of relative valuations between financial assets and safe-haven investments.

When the ratio is elevated, equities are considered expensive relative to gold. Conversely, when it falls to lower levels, stocks are viewed as being available at bargain valuations compared with the precious metal....