Business Daily from THE HINDU group of publications
Thursday, Jan 24, 2008
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Business Daily from THE HINDU group of publications Thursday, Jan 24, 2008 ePaper | Mobile/PDA Version |
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Stock Markets Markets - Insight
Shanthi Venkataraman BL Research Bureau The sell-off in the markets has tempered valuations of stocks forming part of the Nifty. The index itself now trades at a price-earnings multiple of 22, compared to 28 as of January 8, when it peaked. Even after Wednesday’s recovery, there are many Nifty stocks that are trading off their high valuations. Below peak levelsOn an average, the PE multiples of these stocks are 17 per cent below the levels that prevailed at the peak. Seventeen stocks in the Nifty basket are now available at a PE multiple of less than 15, compared to nine earlier. Stocks that witnessed the steepest de-rating since the January 8 peak include Reliance Communications, Reliance Energy, Sterlite and Unitech, which were trading at rich valuations. Unitech, for instance, commanded a multiple of 66 times its trailing earnings per share as on January 8. The multiple has now been whittled down to 50. Sharp dropACC, HCL Technologies, Hindalco, M&M, VSNL, Tata Power, Idea Cellular, Hindustan Unilever and BPCL were among the other stocks that witnessed a sharp drop in valuations. Multiples have shrunk nearly across-the-board. The valuations of banking stocks, however, remain relatively unchanged, with the likes of SBI and Punjab National Bank quickly recovering lost ground. Not yet ‘cheap’All said, valuations of Nifty stocks are not yet “cheap”, going by historical levels. The Nifty multiple of 22 is still well above its 5-year average of 16.50. It was ‘forced selling’ by speculators Sensex and Nifty: Short-term technical outlook Stock markets take a battering again F&O build-up triggers meltdown More Stories on : Stock Markets | Insight
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