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Charts & Analysis

Nifty P/E Close To Extremes While EPS Growth at Lowest in 5 Years, Before July Quarter Results


Indian stock market P/E ratio zooms upward, while earnings growth has been horrible for the Nifty. Here’s the standalone metric:


We’ve added two metrics here – one is an area coverted by green lines, a one standard deviation from the average (which is about 19). Most of the time the Nifty is within the 1 SD range.

The orange dotted lines is a 2 standard deviation move – that is, a much higher extreme. (beyond 2SD is noted at about 5% of the observations).


We are currently at about 23.4 – probably a little bit higher today. The 25 P/E number is a good 500 points away – the Nifty needs to be beyond 9000.

But Earnings Growth Sucks

The last two times we crossed 23 P/E, our Nifty earnings were growing strong, or trending up. Given where we are right now, at -2.12% Earnings Growth for the Nifty as a whole, we are really in extreme territory!

However results are going to come in starting very soon – good, or not? That will determine where valuations really are.


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