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How Pricey Is the Sensex Now?
Nov 4, 2019

How expensive is the Sensex at around 40,000 levels? What has the trend been in recent years?

I thought it would be interesting to see how the valuation of the index has moved over the last five years.

The chart of the day maps the price to earnings ratio of the Sensex from October 2014 to now.

It is worth noting that the Sensex has gained 44% over the last five years, compounding at an annual rate of 7.6% (excluding dividends). Not quite impressive.

During the same period, the Sensex price to earnings ratio has mostly been in a rising trend, except some intermittent declines.

Between October 2014 and now, the gain in the Sensex price to earnings ratio is 42%. That means that the gains in the index have mostly come from expansion in the valuation multiple, and just meagerly from increases in earnings.

So, before taking the current market bullishness for granted, do weigh in the fact that the Sensex is quite expensively priced.

Data Source: CMIE

This Chart Of The Day was published in The 5 Minute WrapUp - What to Buy at Sensex 40,000

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