BSE Sensex valuations inch closer to long-term average

Mar 07 2014, 01:35 IST
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As the Indian equity markets scaled a new high, the benchmark 30-share BSE Sensex. Reuters As the Indian equity markets scaled a new high, the benchmark 30-share BSE Sensex. Reuters
SummaryBSE Sensex earnings grew nearly 2.5 times of India’s annual GDP growth.

this gauge of the long-term price trend.

As per Kotak Institutional Equities, the current prices of quality stocks from the IT, pharma and banking are largely discounting their fiscal 2015 earnings. Hence, investors face a difficult choice between either holding these stocks for FY16 earnings-based expectations or dabbling in a few ‘reform’ stocks in the banking, energy and industrial space on expectations of a good result in the general elections and economic recovery over the next 12-15 months.

“We see limited scope for re-rating of multiples of quality stocks. Most of them are trading well above long-term average multiples, which is relevant in the context of more moderate earnings growth over the next 2-3 years,” the brokerage said in a recent strategy note.

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