At current valuations, the sensex looks remarkably well-priced. The Sensex has a Price-Earnings ratio of 11.1 and a Price-to-Book-Value of 2.3 — figures which are much healthier than those seen for several years when the Sensex was at much lower levels. Of course, all such comparisons are based on trailing earnings — look at forward earnings, and the picture could be quite different as future earnings of most companies are expected to take a dive. Reliance Industries’ trailing PE is very attractive but could look quite different given future earnings could take a toss with refinery margins collapsing. Not surprisingly, the Sensex has risen when interest rates are low and, when the Sensex has done well, companies have managed to raise a lot more funds to finance their expansion plans. Though this year’s bear phase has been less than a fourth as long as the bull one, the Sensex has fallen a lot more sharply, suggesting the worst may not be over. Over the decade, the Sensex remains a better investment than most other global markets — bank FDs and gold, however, are pretty close.
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