Nifty50 valuation hits all-time high
Published On: Thursday, August 6, 2020 | By: Team KnowMyStock
The valuation of the benchmark indices has hit an all-time high as investors bid up share prices. At the close of trade yesterday(5th August 2020), the NSE Nifty 50 index price-to-earnings (PE) multiple reached an all-time high of 30.4 times its trailing 12-month earnings per share (EPS). The current valuation is 38 percent higher than the 10-year average of 22x and over 50 percent higher than the 20-year average of around 20x. In comparison, the index was valued at 28.6x at its life-time high of around 12,355 on January 16 this year. Analysts attribute this to a combination of a steady decline in the Nifty 50 underlying EPS in the last two quarters due to the pandemic and a sharp rise in the index from the March 20 lows.
The index's underlying EPS, which tracks the combined profit of the 50 Nifty companies, is down around 20 per cent from its highs but has corrected just 5 per cent during the period. The index’s current EPS is around Rs 365 against Rs 384 at the end of the March 20 earnings season and a record high of Rs 453 in January this year.
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