f/021006_01.pdf">Click her for
BSRB Study | |
| The study has covered as many as 1,613 companies belonging to the manufacturing and the services sectors. However, it has not taken into account the firms that announced net losses in December 2005. |
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| The P/E is racing ahead of the earnings growth rates of India Inc indeed. While the net profit of the corporate sector for the trailing 12 months ended December 2005 rose 21.56 per cent, the market value of traded stocks has shot up at almost 50 per cent. |
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| The P/E ratio for the BSE Sensex stocks is moving ahead of the market with the 30-scrip Sensex currently trading at a P/E of 18.42. A year ago, Sensex stocks were valued at 15.61 times. |
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| S&P CNX Nifty also witnessed a rise in valuation with the P/E moving up from 14.05 times a year ago to the current level P/E of 16.80. |
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| In contrast, Hong Kong Hangseng's P/E is around 14, FTSE-100's is 14.8, Dow Jones Industrial's 18.2, Japan's Nikkei-225's 36, Korea Kospi's 11 and Thailand Bangkok SET's 9.5. |
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| The rise in market values of the Indian shares by more than double of India Inc's earnings growth rate has been attributed to the relentless buying by foreign institutional investors (FIIs). The local mutual funds have also chipped in, having mobilised huge money through the launching of new equity schemes. |
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| The P/E ratio of BSE-500 stocks too rose substantially, to 16.93 times, during the same period from a year-ago level of 13.36 times. The P/E average, however, declined to below 15, if the Sensex stocks are excluded from the sample taken for this study. |
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| The ex-Sensex stocks are currently trading at a P/E of 14.98 compared with a year-ago level of 11.27 times. The BSE A-group stocks are trading at a P/E of 16.47 times, higher than a year-ago level of 13.40 times. |
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| The B1-group shares are trading at a P/E of 15.52 against 12.77 times a year earlier. The market valuation, however, remained on the lower side for the non-A and B1 group stocks. |
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| While the trailing-12-month net profit of the B-group stocks saw a surge of 104 per cent, their market value in the last one year moved up at a lower rate of 88.7 per cent. As a result, the P/E ratio of the B-group stocks declined from 9.36 times a year ago to 8.63 times now. |
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| The S group (small-cap stocks), however, is racing with the market, with a strong 50 per cent rise in the trailing-12-month net profit. With the market value of the S group stocks shooting up 108 per cent in the last one year, their P/E surged to 16.46 times now, from 11.91 times a year ago. |
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| Despite the high alerts sent out by the capital market watchdog, the Securities and Exchange Board of India, the T (trade-to-trade) group stocks continue to trade at a high P/E. The T-group stocks are currently trading at a P/E of 49.25 against a year-ago level of 28.26 times. |
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| The TS-group (small caps within the T group) too commands a high premium on the bourse with the P/E valuation perking up to 28.39 times from 17.7 a year ago. The Z-group stocks' P/E has, however, remained stationary at around 18 times. |
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| Of the 98 sectors tracked by the Business Standard Research Bureau, the P/E trend shows that only 14 sectors are currently trading at a P/E below 10 vis-a-vis a year-ago level of 26. |
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| The P/E of as many as 46 sectors is moving between 10.1 and 19.99, and for 38 sectors, it is hovering over 20 times. A year ago, 56 sectors were trading at a P/E of between 10.1 and 19.99, while 16 other sectors were trading at a P/E of over 20 times. |
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| Integrated steel manufacturers command the lowest P/E among the 98 sectors. The P/E of steel companies declined to 4.49 from a year-ago level of 5.72 times. The shipping sector ranked second with a P/E of 4.53 (4.98 a year ago). Among others, alkalies 5.19 (8.31), hatcheries 6.48 (6.80), granites and marbles 6.49 (4.07) and petrochemicals 7.42 (10.07) are trading at a P/E of below 10 times. |
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| The stocks traded under the retail sector command high premium in the market. Three stocks -- Pantaloon Retail, Trent and Zodiac Clothing -- are currently trading at a P/E of 71.68 against a year-ago level of 53.09 times. Pantaloon Retail commands a P/E of 89.59 times, while Trent 54.64 times and Zodiac Clothing 28.50 times. |
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| Among others, the sectors that command high premium in the market are breweries with a P/E of 44.54 (31.44 a year ago), hospitals 40.68 (28.82), entertainment 39.61 (32.89), hotels 37.63 (30.44), capital goods 32.92 (22.79), infotech 32.69 (28.00), forgings 32.19 (29.60), oil drilling 30.96 (21.95), pharmaceuticals 30.92 (25.25) and engineering 29.75 (14.38). |
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| FIIs bought shares worth $10.6 billion (Rs 47,604 crore) in the Indian stock market in the calendar year 2005. During the year, the Indian firms also mopped up almost $5 billion (Rs 22,400 crore) through offerings of foreign currency convertible bonds. |
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| Domestic mutual funds with the huge fund flows of Rs 35,000 crore through growth schemes were net buyers in the equity market after a gap of almost six years. They poured in the biggest ever inflows of Rs 13,305 crore in the market during the calendar year 2005. |
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| The fund mobilisation by Indian companies through initial public offers (IPO) and second offers went up substantially in 2005. |
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| According to a Prime Database report, Indian companies garnered Rs 22,753 crore through the public issues last year, of which Rs 9,989 crore through fresh issues. The report indicates that Indian companies mopped up Rs 13,300 crore from overseas issues of equity shares. |
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STRONG PITCH
- P/E trend shows that only 14 sectors are currently trading at a P/E below 10
- P/E of as many as 46 sectors is moving between 10.1 and 19.99
- Integrated steel manufacturers command lowest P/E among 98 sectors
- Sectors that command high premiums are:
Retail 71.68
Breweries: 44.54
Hospitals: 40.68 Entertainment: 39.61
Hotels: 37.63
Capital goods: 32.92
Infotech: 32.69
Forgings 32.19
Oil drilling 30.96 Pharmaceuticals 30.92 |
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