Wealth Insights from Experts
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Low PE ratio indicates that the index is trading at discounted value. High PE ratio indicates the reverse. However, PE ratio shouldn’t be referred in isolation. For correct assessment, one should refer to other fundamentals aspects along with this ratio.
Low PB ratio indicates that the index is trading at discounted value. High PB ratio indicates the reverse. However, PB ratio shouldn’t be referred in isolation. For correct assessment, one should refer to other fundamentals aspects along with this ratio.
a) On comparing Index growth vs Earnings growth, we find that Nifty Bank Index is overvalued by 56 %.
b) For fair valuation, the Index and EPS lines should coincide.
c) To arrive at a fair valuation, either the index falls by 56 % or EPS rises by 128%.