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Market Valuations - 2014 to 2019
Mar 8, 2019

In one of my earlier editorials, I had shown how the Sensex price to earnings ratio has moved over the last five years...

It has mostly been in a rising trend, except some intermittent declines.

But as I've mentioned time and again, the Sensex tells a very a selective, skewed story of just the 30 largest companies.

So, I thought it would be worth seeing the valuation trend of a much broader index.

I picked the NSE 500 for my latest study.

As you can see, the NSE 500 index was trading cheap before the BJP came to power at the Centre in 2014. Since then, the price to earnings ratio of the index has been trending higher, like the Sensex.

It is interesting to note that the NSE 500 index has almost doubled between February 2014 and now. The price to earnings multiple of the index has gone up almost 70% during the same period.

What this means is that the gains have mostly come from valuation multiple expansion and only about 30% from earnings growth.

While the NSE 500 P/E ratio is down 12% from its August 2018 high of 34.5, it's still quite on the higher side. As such, I believe the key to the next bull run would be a good growth in earnings of listed Indian companies.

Data Source: CMIE

This Chart Of The Day was published in The 5 Minute WrapUp - Is Your Stock Portfolio War-Ready?

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2 Responses to "Market Valuations - 2014 to 2019"


Mar 12, 2019

in my opinion to make any investment on basis of anticipated election result will not be advisable. any election result would have temporary market euphoria but at end fundamental will reflect in prices pf shares.


Diwakar Prasad

Mar 11, 2019

It is thought provoking. I would like to know how to get p/e ratios of all recommended equitymasters stock fm last five yrs for all qtrsfor their assessment.

Equitymaster requests your view! Post a comment on "Market Valuations - 2014 to 2019". Click here!

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