look news india
New Delhi: Due to continuous selling in the market, the valuation of India’s stock market has fallen to the lowest level in at least 30 months. The benchmark Sensex is currently trading at a price-to-earnings multiple (PE) of 21.9 times, the lowest since June 2022. Excluding the period till June 2022, the current value of the Sensex is the lowest since June 2020.
Data shows that the current valuation of Sensex is much lower than its normal valuation in the past. There have been only two occasions in the last 8 years when the index was undervalued. A huge decline was seen in the market during the Corona epidemic in the period March-June 2020 and after the end of Corona in June 2022.
In comparison, the index was trading at 24.6x PE in January 2024 and 24.75x PE in September 2024. The index is currently trading about 9.2 per cent below its 10-year average valuation of 24.1 times. A persistent decline in the index’s valuation means that the share price is not keeping pace with the growth in underlying earnings per share. The continued decline in the index valuation ratio despite good earnings growth in recent years suggests that investors are concerned about future earnings projections. Large investors, especially foreign portfolio investors, fear that earnings per share may decline further from current levels. That is why they are being sold in the market.
Foreign investors can invest Rs. this month till 23rd January. There has been a sale of Rs 58,804 crore. It’s also possible that they sell in hopes of faster earnings growth in other markets like the US.
Nifty 50 earnings per share grew only 4 percent year-on-year in the current fiscal year, much lower than the 18 percent growth estimated at the beginning of the fiscal year.
Aggressive selling of stocks by foreign investors continued in January
Aggressive selling by foreign institutional investors (FIIs) in Indian equities has continued in the first month of 2025. Foreign investors have been net sellers of equity cash on most trading days in the current month. Till January 24, FIIs have made a total net sale of Rs 69080.14 crore. While domestic institutional investors (DIIs) are making net purchases of Rs 66944.50 crore in cash.
Market circles believe that foreign investors are continuing to sell due to the strengthening dollar.
FII selling continues due to strengthening of dollar index and US bond yield remaining above 4.50 percent. Foreign investors have significant exposure to the financial sector in Indian equities.