One-third of NSE 500 stocks now cheaper than pre-covid valuation
NSE 500 stocks are cheaper than their pre-Covid valuations, as measured by price-to-earnings (PE) and price-to-book (P/B) ratios. Following the sharp market correction since October 1, several blue-chip companies are 10-60% below March 2020 levels by these key metrics. They include HDFC Bank, Bharti Airtel, ICICI Bank, State Bank of India (SBI), Hindustan Unilever (HUL), Bajaj Finance, Kotak Mahindra Bank, Maruti Suzuki, Axis Bank, Bajaj Finserv, Avenue Supermarts, Coal India and Asian Paints.
For banks, the valuation is derived from the price-to-book. When PE and PB ratios are higher than long-term averages, a company is perceived to be more expensively valued and vice versa.
While some stocks have corrected due to weaker earnings, others have delivered a strong performance over the past five years but this isn't reflected in the valuation.
Out of 414 NSE 500 stocks for which data is available, 120, or 28%, are below pre-pandemic levels.
India's market valuation has been contracting over the past three quarters, primarily due to stagnant earnings, analysts said.
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