The chart shows that Indian equities are trading at 13.5 times 12-month forward earnings, below their long-term average. Mainly that has been driven by a steep decline in earnings per share estimates.
Now, after the latest set of data showing deterioration in fundamentals, brokerages such as CLSA Asia-Pacific Markets are predicting levels of 11,000-12,000 for the Sensex.
At the lower end of those levels, assuming that there are no further EPS cuts, the index would trade at 9.6 times forward earnings. Which means that some market pundits, at least, are predicting that the market will plunge to the depths last seen in the aftermath of the Lehman crisis.
Also See : Chart of the day | Some more way to go (PDF)
Graphics by Yogesh Kumar/Mint
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