The Truth about P/E Valuations

My friend and fund manager Kaushik Dani said it rightly "P/E stands for the Perception of Earnings". It is far more than a financial ratio and has become a measure of sentiment. Then measuring it right was important. The trend towards consolidated earnings is over a decade old. Ever since the likes of the Tata group took over foresight companies that reported most of the revenue. Or when Rcom became an important part of the Reliance revenue numbers. Most websites like Moneycontrol were already reporting both Standalone and Consolidated earnings. So whether you like it or not the sharp decline in the PE ratio on this chart partly aided by the exchange now reporting consolidated earnings PE ratios was nothing but the right thing to do. Now you have the real picture and yes earnings are bouncing back pushing the ratio back as well in the unlock trade. So we are not at peak valuations anymore. The liquidity argument for an overvalued stock markets is therefore still a false narrative because we are not there yet. And that does not mean liquidity has not helped. The bubble you say? In your mind heart or head I ask? or in this PE chart? You can track this chart at https://trendlyne.com/equity/PE/NIFTY500/1893/nifty-500/