P/E multiple of Sensex, Nifty yet to scale life-time highs

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Mumbai, Dec 15: Even as the benchmark indices, Sensex and 50-share S&P CNX Nifty, have hit their all-time highs, their current P/Es are far from it.

The Sensex is currently trading at a P/E multiple of 19.48 even as it touched its all-time high of 6423.27 points. This is lower than the highest P/E of 20.21 witnessed on January 8, when the Sensex closed at 6108.54 points. The market capitalisation of the Sensex on Wednesday inched up 1.26% to Rs 7,19,400 crore from Tuesday’s close.

Similarly, the S&P CNX Nifty is trading at a P/E of 16.76, which is sharply lower than 21.71 registered on January 8. The lower P/E indicates ample room for further appreciation in valuation.

Interestingly, this is not the highest range in which the P/E is being currently traded. It was in January when the P/E was traded well above a multiple of 20. However, it is much higher than the last two years average P/E of 15.70.

In terms of averages, the first quarter of 2004 had the maximum P/E multiple at 18. This was on account of strong corporate performance. Interestingly, the second quarter of 2003 shows a P/E multiple of 13.65. This was one of the lean phases of the stock markets when valuations were not really catering to core fundamentals.

According to an analyst at a leading broking firm, “Based on averages, the P/E multiple is not at all on the higher side. It moves along with the past averages. The ratio is simply showing the fundamental strength of the market.”

On the market capitalisation front, the biggest winner was Zee Telefilms. The scrip moved up from Rs 160 to Rs 178 accumulating a gain of 11% in one day. The second and third position was bagged by Bharti Tele-ventures and Larsen and Toubro which gained 6% and 4.5%, respectively.

The major losers in terms of market capitalisation were Reliance Industries, Reliance Energy, HDFC Bank and ACC. Reliance Industries fell 2% from Rs 505 to Rs 495, ACC by -0.63% (from 315.35 to Rs 313.35), HDFC by -0.20% (475 to Rs 474) and Reliance Energy by -0.25% (from Rs 514.8 to Rs 513.5).

The ownership issues among the Ambani brothers have plagued the Reliance group companies. The scrips are losing their lustre on a day-to-day basis.