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Charts & Analysis

Indian Market Snapshot: Aug 12, 2011

The Nifty’s fallen 16.5% from it’s near-term high of 5700 and it’s nearly 20% from the all-time high as of Friday. The P/E has now fallen to near 18, which brings it to sane levels after a very long time. The week saw a down move of 2.7%.

Nifty Snapshot 

Sectoral moves of the week show IT taking the biggest hit, with Auto moving up on what might be short covering. The next week will be just as volatile, though shortened with the Independence day holiday.

Sector Moves 

This kind of post goes to a weekly format. The daily post seems to have little or no interest.

  • Sanjay says:

    How is nifty PE calculated? You had mentioned that we should not consider stand-alone earnings and we should consider consolidated earnings for PE calculation. Are we considering consolidated earnings here?
    Can we consider nifty to be undervalued at this time if we consider consolidated earnings? Is it right time to buy?

  • Gaurav Sehgal says:

    Hi Deepak,
    Your posts are indeed intriguing. .
    But i too would second Sanjay in his opinion; that we rather evaluate index P/E based on 12 months ‘consolidated’ forward earning than on TTM
    referring to your earlier article we have ‘consolidated’ EPS for SENSEX as 1039 for FY11. Thus my now after about 4 months into FY12, we should be somewhere at EPS of 1080 (i guess so); thus 12 months forward, assuming a moderate growth (looking at current macro economics scenarios) of about 10-12%, we are talking about EPS of 1200. So, SENSEX @ 16840, we are taking of 14 times forward earnings. Its seems at ideal levels to go long!!
    Am i thinking it right?

    • I hope the consolidated results are still as good – it seems that both TTM and Tatasteel will have much lesser consolidated profits this quarter for instance. I would go with consolidated though, but not “forward” – we can look only at past, because the future is predictions and usually wrong.
      Even then, micro-prediction: I think the cons EPS should now be around 1050, I expect the full year’s EPS to be 1100 to 1150. At 1100 we aer still at 15x which is greater than the 10% growth I see going forward. So no, I don’t think we’re are long-able levels (you want seriously undervalued sensex, not “fair” value, and definitely not average value in a time when growth is slowing)