Author Topic: Equity Valuation - Cheap / Expensive ?  (Read 35 times)

0 Members and 1 Guest are viewing this topic.

resh

  • Sr. Member
  • ****
  • Posts: 279
Equity Valuation - Cheap / Expensive ?
« on: July 08, 2019, 09:05:36 AM »
Often Investors Face the Dilemma if Indian Market Valuation is Cheap or expensive ?

Indian BSE 500 Market Cap as on July-5 is US $2.03 Trillion
Indian GDP Estimates for FY 2019-2020 - $2.97 Trillion
Indian Market Cap / GDP = 0.68

In 2008, Market Cap to GDP was Greater than 1.

NIFTY P/E Analysis
In Jan 2008  NIFTY was 6274 and EPS for FY 2008-09 - Rs 228  Thus the Most Expensive P/E = 27.5
In July 2019  NIFTY is 11,811 and FY 2019-20 NIFTY Expected EPS is Rs 580 = 20.36 Forward P/E Assuming 20% Growth

The Market doesn't appear to be overheated. However, EPS expectation of 20% Growth is a Bit Too much as it has not come in the last 20 quarters (5 Years)

So what happens if EPS Growth is just 10% ?
NIFTY EPS = Rs 530 and thus NIFTY P/E will be 22.3 still lower than Historical High of 27.5.