Readings: Valuations, Irrational Exuberance and such
While I don’t have much anecdotal evidence of exuberance amongst retail investors - and hence believe that this bull’s still got legs - I thought I would share some headlines that are starting to pop-up:
A huge growth of around 22% in the last three months is actually far from what the fundamentals dictate. This is so when one considers the subprime crisis, a fall in the index of industrial production, exports suffering due to a strong rupee and corporate performance expected to take a hit due to rising interest rates and input costs. These facts show that there is very little that justifies such unparalleled and unseen market growth.
- Business Standard: Valuations see marginal rise
The BSE Sensex has crossed historical averages on all parameters and the Sensex now trades at a P/E of over 25 times based on the earnings for the trailing twelve months ended June 2007. The Sensex, according to Motilal Oswal, is trading at a P/E of over 21 times on the forward earnings for the financial year ending March 2008.
The Sensex P/E of 25.92, based on the net earnings for the trailing twelve months ended June 2007, will go up to 27 if one excludes PSU companies from the valuation.
David A. Wyss, chief economist of rating agency Standard & Poor’s, says that the next “bubble” could be in the debt and equity markets of emerging market economies, including China and India.
Wyss estimates that at least $600 billion could come into the Indian markets from Russia, Canada and also the Organization of the Petroleum Exporting Countries.
That $600B number seems out of whack to me.
Anyways, where are the rose-colored glasses, the stock market tips handed out by aunties, the folks who quit their salaried jobs for day-trading?
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October 10th, 2007 at 12:41 pm
Just for information:
Sensex P/E was 57.42 on the 22nd April 1992. Then after long recession the P/E touch a low of 10 in May 2003.