In the past five years, however, the rise in profit and stock price growth for India Inc have moved in tandem, lending credence to the notion that the markets are slaves to earnings growth.
Consider this: Earnings for Nifty 50 companies increased at a compound annual growth rate (CAGR) of 18 per cent between FY19 and FY24, almost mirroring the growth in market capitalisation during this period.
"This shows that the market is trading at a fair valuation," says Gautam Duggad, head of research of institutional equities at Motilal Oswal Financial Services. "The 10year average price-to-earnings (P/E) multiple is about 20.2x on a one-year forward basis, similar to current valuations." He expects Nifty 50 earnings growth to compound at a 15 per cent CAGR over FY25 and FY26.
This story is from the July 09, 2024 edition of Business Standard.
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This story is from the July 09, 2024 edition of Business Standard.
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