Despite a steep correction in equity markets, India remains expensive compared to its peers. The market could remain expensive if the downgrades in profit estimates, post the earnings season, are significant, Financial Express reported.
From the peak of 18,477.05 on October 18, 2021, the Nifty closed at 16,240.30 on Wednesday, a fall of 12.1%. At its peak, the 50-stock gauge was trading at a price-earnings multiple (P/E) of 22.74 estimated one-year forward earnings, according to data sourced from Bloomberg. That P/E multiple has now come down to 17.93 times, closer to the ten-year average multiple of 16.79 times.
However, the multiple is higher compared with 16.4 times for the Jakarta Composite, 11.6 times for the Taiwan TAIEX and 10.1 times for the KOSPI. Other markets such as Shanghai Composite, and Brazil are even less expensive.
Motilal Oswal wrote on May 10, that profits for 25 Nifty companies had grown 26% y-o-y in Q4FY23 better than the estimate of 22%. Excluding BFSI, the profits for these Nifty companies would have grown 19% y-o-y, compared with the estimated 15% y-o-y. For the 91 companies within the MOFSL Universe, profits rose 31% y-o-y against the estimated 24% y-o-y.
Meanwhile, BofA Securities on Tuesday cuts its Nifty target to 16,000 from 17,000 earlier, on the back of Interest rate hikes in the US; inflation worries; and a recent off-cycle rate hike by the RBI.
The brokerage house also said in a negative scenario, the Nifty's valuation multiple can shrink to 15.8x (LTA) with its target at 13,700 points, implying a 15 per cent downside from current levels.
The revised projection is based on faster-than-earlier-tightening by the Reserve Bank (by 40 basis points earlier this month in an off-cycle hike) as well as central banks of other key countries, it said.
Further, Headline indices the Sensex and the Nifty ended lower on May 18, a day after witnessing sharp gains. Sensex opened 236 points higher at 54,554.89 and touched an intraday high of 54,786 before succumbing to profit booking and ending 110 points, or 0.20 per cent, lower at 54,208.53. Nifty50 closed 19 points, or 0.12 per cent, lower at 16,240.30.
