Sensex’s average 20-year PE is 16. 8, which means it’s about 40% above its 20-year average lately. The PE ratio is relative and decreases with earnings expansion. Theoretically, a 25% earnings expansion for Sensex’s 30 corporations would decrease this ratio from 24. 8 to 19. 8, where it would start to look more reasonable. A 15% earnings expansion would bring it down to 21. 6.
Revenues for the last 3 years have been affected by the Covid-19 pandemic, so in some quarterly periods, there is a base effect to take into account. From the quarter to September 2022, the covid effect was contained.
Another metric used to measure the richness of market valuations is the market capitalization-to-GDP ratio. Basically, it’s the price-to-sales ratio of an entire country. Over the years, the reading of this ratio has been that a figure below 50% makes a market undervalued and a figure above 100% overvalues it.
Download the Mint app and premium items
Log in to our to save your favorites. It will only be a matter of a moment.
You’re one step away from building your watchlist!
Ups! It looks like the allowed limit for loading the symbol into your favorites has been exceeded. Remove a few to load this symbol into your favorites.
Your query has expired, please log in again.
You are now subscribed to our newsletters. If you are unable to locate any emails from us, please check your spam folder.
This is a subscriber-only feature. Subscribe now to receive updates on WhatsApp.