Nifty valuation more sober today than in October 2021: Motilal Oswal

economictimes.indiatimes.com:

Sensex and Nifty are touching all-time high peaks every day, domestic brokerage firm Motilal Oswal on Monday said the valuations are far more reasonable now than that during October 2021 high. «As the benchmark soars to a new high, the Nifty trades at a 12-month forward P/E of 18.8x, at a 6% discount to its own long-period average (LPA). Further, it also trades at a 12-month forward P/B of 3x, at a 10% premium to its LPA,» Motilal said in a strategy report.

Nifty EPS grew ~19% during FY20-23 to Rs 807 as against market returns of ~14% over Jan’20-Jun’23. «While Nifty50 is at a new high and is creating a lot of buzz, the fact remains that on a two-year basis, it stands nearly flat (just up 4% from Oct’21 high); whereas its aggregate FY22/FY23 earnings are up ~38%/10% and that for MOFSL Universe are up 39%/10% over the same period,» Motilal said. On the back of strong FII flows, Sensex today zoomed past the 65,000 mark for the first time while Nifty rallied above the 19,300 mark.

Other than macro drivers like strong GDP growth, stable crude prices and moderating inflation, the bull run has also been driven by solid growth in corporate earnings and expectations of high-teens earnings CAGR over FY23-25. Since December 2021, both mid- and small-caps have outperformed Nifty by 9% and 6%, respectively. All eyes would now be on the June quarter earnings season which begins next week with IT sector bigwig TCS announcing Q1 numbers on July 12.