P/e ratios look up as markets soar and earnings lag - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks


Login Failure
(Please do not use this option on a public machine)
  Sign Up | Forgot Password?  
  • Home
  • Outlook Arena
  • Feb 29, 2000 - P/e ratios look up as markets soar and earnings lag

P/e ratios look up as markets soar and earnings lag

Feb 29, 2000

According to the Economic Survey the market capitalisation of the Bombay Stock Exchange (BSE) increased by 65% Rs 8 trillion between April and December 1999.

The Survey highlights two key factors to reflect on the increase in secondary market activity.

First, the average daily turnover on the two national stock exchanges (BSE and NSE) jumped nearly 100% during the period under consideration to Rs 80 bn. And second, net FII inflows amounted to US$ 1.3 bn, as compared to an outflow of US$ 540 m in the corresponding period last year.

During the nine months ended 31st December 1999 two interesting developments took place. First, there was a marked rise in the price to earnings ratio of the BSE Sensex. The p/e ratio increased from a low of 9.83 in October 1998 to 20.9 in December 1999. The surge in the ratio could be attributed to the sharp rise in the market indices and the slower growth in the earnings of corporates. What is of interest to note is that the rise in the markets took place despite international turmoil (Brazil 1999), war at Kargil and general elections. Not to add the deteriorating financial health of the central and state governments and the poor results turned out by corporate India for 3QFY00.

The second interesting development pertains to the sharp decline in delivery based trading. On the BSE delivery based trading accounts for only 25% of overall turnover, while on the NSE the corresponding figure stands at a dismal 9%. Whether this marks a rise in speculative activity cannot be said and even the Economic Survey has refrained from commenting on this.

However it needs to be mentioned that the dematerialisation initiative of the Sebi seems to have been successful. On the NSE, which has a depository, 76% of the delivery-based trades were settled in demat form. On the BSE however the figure was a pathetic 1.3%. The BSE can be expected to fare better once its own depository gets off the ground.

Equitymaster requests your view! Post a comment on "P/e ratios look up as markets soar and earnings lag". Click here!


More Views on News

Ride the Indian Real Estate Revival with this 'Different' Smallcap Stock (Profit Hunter)

Mar 23, 2021

Affordability in the housing segment has never been so good in last one and a half decade. Here's how you could make the most of it...

My Latest Stock Recommendation (Fast Profits Daily)

Oct 9, 2020

How I picked an exciting stock using trends from both the commodity and equity markets.

Data is the New Oil but It's Also the New Sugar. Here's How to Fight it (Profit Hunter)

Jun 1, 2020

Is too much data hurting your quest for market beating returns?

Quantum Mutual Fund: Hum woh nahi hain (The Honest Truth)

Apr 29, 2020

Ajit Dayal on how the mutual fund industry robs you of your wealth.

This One Trigger Could Turnaround Yes Bank's Stock Price (The 5 Minute Wrapup)

Oct 16, 2019

If Yes Bank manages to do this, it could be the start of a much-needed turnaround for the bank.

More Views on News

Most Popular

Hotel Stocks Will Reward Investors (Fast Profits Daily)

Jun 8, 2021

This is why I'm bullish on the hotel and hospitality sector.

My 'Unlock' Investments (Fast Profits Daily)

Jun 11, 2021

The best unlock investments you can make in the market.

The Most Visible Sign of India's Revival is on Two Wheels (Profit Hunter)

Jun 9, 2021

Investing in the best stocks could result in wealth compounding on a massive scale.

How I Discovered a 400-Year-Old Open Secret to Extreme Wealth (Profit Hunter)

Jun 11, 2021

Charlie Munger's open secret about investing success.


India's #1 Trader
Reveals His Secrets

Secret To Increasing Your Trading Profits Today
Get this Special Report,
The Secret to Increasing Your Trading Profits Today, Now!
We will never sell or rent your email id.
Please read our Terms