No Val­u­a­tion Com­fort

Business Today - - THE BUZZ - – Apra­jita Sharma

A LITANY OF FAC­TORS, from ris­ing crude oil prices to the record-low ru­pee, the liq­uid­ity crunch post IL&FS loan de­fault, and the Si­noUS trade war led to a bat­ter­ing on Dalal Street. The NSE Nifty is off 11 per cent from its all-time peak of

11,760.20 on Au­gust 28. While trail­ing Price to Earn­ings (PE) mul­ti­ples should not be seen in iso­la­tion, they do sug­gest that the mar­ket is still trad­ing at a pre­mium over its his­tor­i­cal PE ra­tio. The 12-month trail­ing PE for Nifty at 25.33 is still higher than its five-year av­er­age of

22.75 and 10-year av­er­age of 20.98. For­ward mul­ti­ples at 20 times

FY19E earn­ings per share (EPS), too, sug­gest that earn­ings need to catch up or one may be star­ing at fur­ther down­grades. The spread between bond and earn­ings yields is 4 per cent, even af­ter the re­cent cor­rec­tion. One can only hope for ro­bust earn­ings in the Sep­tem­ber quar­ter. Oth­er­wise, the sit­u­a­tion will de­te­ri­o­rate fur­ther as we move closer to state assem­bly and gen­eral elec­tions.

Newspapers in English

Newspapers from India

© PressReader. All rights reserved.