Investors appetite keeps volatility at bay; listed cos high on P/E ratio

Written by Pradip Kumar Dey | Mumbai, Dec 15 | Updated: Dec 16 2007, 10:44am hrs
A high volatile scenario in the stock market does not seem to have impacted investors appetite for Indian equities. In fact, valuation numbers for Indian equities are growing and the price earnings (P/E) ratio of Sensex companies has gone up 27.30 times (latest trailing earnings) during December, from the level of 22.22 times in the same period previous year.

BSE companies too were trading at 26.4 times, on December 14, as compared with the level of 19.8 times last year.

Sectorally, NBFC, fertiliser, trading, retailing, sugar, electronics, electricity, engineering companies valuations have grown the most over the past one year. Of 35 industries studied, the P/E ratio of 26 industries increased during the study period.

Strong business prospects and interest evinced by overseas investors, has seen the average P/E of 301 NBFCs rise. From 20.05 levels on December 14, 2006 it is now at 40.98 times trailing earnings on 2007.

Market capitalisation for the NBFC sample group increased 161.29% to Rs 2,70,295 crore, from Rs 1,03,446 crore. Trailing four quarters net profit of these companies increased by 27.9% during the same period.

In the retailing sector, the average PE of five companies increased from 68.12 times on December 14, 2006 to 115.7 times on December 2007.

Total market capitalisation of this group increased 36.08% to Rs 15,606 crore over the year. But the trailing net profit of these five retailing companies decreased 19.9% to Rs 135 crore.