Sensex trailing P/E falls to 12-mth low

The latest correction in the Indian markets has led to a sharp decline in equity valuations in the country.

- KRISHNA KANT

The trailing price-to-earnings (P/E) multiple of the benchmark BSE Sensex declined to 22.9x on Monday, the lowest in the past 12 months and down nearly 10 per cent from a high earnings multiple of 25.2x at the end of March this year.

This valuation is nearly 5 per cent lower than its 10-year average valuation of 24.1x, which is not common.

In the past 10 years or 120 months, Sensex valuation has fallen below the 10-year average on only 19 occasions. In other words, 81 per cent of the time the market has traded above its long-term average valuation.

The benchmark index was down 1.18 per cent on Monday and closed at 78,782 compared to Friday's close of 79,724. With this, the index is now down 6.5 per cent from its monthly closing high of 84,300 at the end of September.

In comparison, the index underlying earnings per share (EPS) is up 1.2 per cent during the second-quarter earnings seasons so far. The index ended Monday with an EPS of ₹3,446.8 compared to an EPS of ₹3,406.1 at the end of September.