Overall, the market seems to be hot to me today. As we have seen earlier, most of the investor's returns in the market from 2013-16 is made through multiple expansion (~80-90% of the returns came from multiple expansion & balance came from Net income growth). Considering this point in mind, if we invest when the multiples are at peak then the probability of making multibagger returns reduces significantly going forward. Definitely not a right time for a value investor. Retail Investor, please move wisely as one will be exposed to nth momentum based & sentiments driven opportunities which might lead to trouble in future.
India definitely remains a solid growth story but given the current level of entry valuations, the market definitely looks expensive. Grab the opportunity when the markets take a dip in the holy blood!
Apologies for too many charts and data but I love to prove my point which is backed by data :)
Apologies for too many charts and data but I love to prove my point which is backed by data :)
Sensex Valuations – Almost hitting the roof; not backed by earnings growth
-Trailing p/e - 30% higher than long term median (17x) & 10% lower than Life time high (26x)
Value vs Price mismatch?
Does it look fair to pay 23x trailing p/e multiple (price) for 13% ROE (value)?
70% of the BSE 500 stocks are trading >50x trailing p/e
Street's consensus of 1 yr forward p/e adjusts premium in valuation
Current multiple factoring ~17-18% EPS growth for the next 2 years
Story is not very different in case of Mid Caps
Current trailing p/e multiple of 25x is trading at 25% premium to long term average of 20x
Source: Bloomberg, Ambit Capital
