Nifty’s PE falls 20% from March high on new formula, mkt decline

Nifty’s PE falls 20% from March high on new formula, mkt decline

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The change in calculations have made Nifty’s valuations cheaper, but they are still higher than the regional peers.

Synopsis

The exchange in February announced that index PE ratio will be calculated by taking into consideration earnings, including profits and losses, reported by each index constituent in the trailing four quarters on a consolidated basis effective from March 31.

Mumbai: Valuation of India’s key benchmark has shrunk following the NSE’s move to change the calculation methodology and the decline in the market in the past month. The Nifty’s Price to Earnings (PE) ratio — a popular valuation measure — based on 12-month earnings has declined nearly 20 per cent from a March high of 41.60 to 33.5. The NSE decided to consider consolidated earnings to calculate PE ratio from March 31. This has resulted in Nifty’s

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ET Bureau

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