Higher but cheaper

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You never step into the same river again, goes the saying. The fast-flowing water is contantly changing the river and its contours. The same can be said about the Indian stock market. In the past decade or so, the benchmark BSE Sensex has made nine new highs but no two highs were the same. Prior to the 2008 meltdown, every new high made the market more expensive as bulls chased higher earnings and companies tried to match their expectations. After the 2008 crisis, however, the Sensex progressively got cheaper even as it scaled new highs. For example, the Sensex is currently trading at a little over 18 times its underlying earnings per share as against 28.5 times during the highs of January 2008. A similar trend is visible in parameters such as the price-to-book value and the dividend yield