OPEN APP
Home >Markets >About 60% of Nifty stocks trade at premium to historical averages

About 60% of Nifty stocks trade at premium to historical averages

The Nifty has climbed 12.4% this year so far was on the back of strong foreign institutional investors (FII) inflows, receding of the second covid wave boosting confidence in an economic recovery, and an inline earnings season. (Mint)Premium
The Nifty has climbed 12.4% this year so far was on the back of strong foreign institutional investors (FII) inflows, receding of the second covid wave boosting confidence in an economic recovery, and an inline earnings season. (Mint)

  • Companies trading at a significant premium to their historical averages are Wipro (up 75%), HCL Technologies (up 74%), Asian Paints (up 73%), BPCL (up 65%), and Divi’s Labs ( up 63%).

As markets are surging ahead with benchmark indices hitting record highs multiple times, valuations of stocks are also getting expensive. According to Motilal Oswal Financial Services’ analysis, around 60% of Nifty constituents are at a premium to their historical averages.

Companies trading at a significant premium to their historical averages are Wipro (up 75%), HCL Technologies (up 74%), Asian Paints (up 73%), BPCL (up 65%), and Divi’s Labs ( up 63%).

At current levels, Wipro is trading at 26.3 times price to earnings (PE) whereas its 15-year PE average stands at 15 times. HCL Tech is currently at 18.4 times PE while its 15-year average PE is 10.6, for Asian Paints current PE is 78 times and its 15-year average PE 45 times.

Companies trading at a significant discount to their historical averages are Tata Steel ( down 69%), Coal India ( down 55%), ONGC ( down 51%), JSW Steel (down 42%), and NTPC (down 41%), the brokerage firm said. For Tata Steel, current PE is at 4.8 times while 15-year PE is 15.4 times, current PE for Coal India is 5.6 times and 15-year average PE is 12.4 times.

When it comes to sectors, two-thirds of them are at a premium to their averages, showed the analysis.

“The technology sector is trading at a PE of 26.5 times, a 53% premium to its historical average of 17.3 times. Accenture reported strong Q3 earnings, increasing its FY21 revenue growth guidance by 300 basis points (midpoint) on a better-than-expected demand environment. We see its Q3FY21 delivery and commentary as a positive read-across for our Indian IT Services coverage as it indicates continued robust demand in key industries," Motilal Oswal Financial Services said.

The Nifty has climbed 12.4% this year so far was on the back of strong foreign institutional investors (FII) inflows, receding of the second covid wave boosting confidence in an economic recovery, and an inline earnings season. Midcaps and smallcaps outperformed largecaps by 3.7% and 4.1% respectively in June.

“In the last 12 months, midcaps have risen 83% versus a rise of 53% for the Nifty. In the last five years, midcaps have outperformed by 5%. The Nifty Midcap 100 PE now trades at par with Nifty," said Motilal Oswal Financial Services said.

Subscribe to Mint Newsletters
* Enter a valid email
* Thank you for subscribing to our newsletter.

Never miss a story! Stay connected and informed with Mint. Download our App Now!!

Close
×
Edit Profile
My ReadsRedeem a Gift CardLogout