2 min read.Updated: 28 Feb 2022, 10:31 PM ISTAkhil Chaturvedi
Many good quality stocks are available way cheaper than their recent highs
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A correction in the market was long overdue. It has also brought in clear differentiation between the weak and strong fundamental companies. The last three quarters were the best years in terms of year-on-year (y-o-y) earnings growth for Nifty50 in over 15 years. However, it did not reflect in price gain for Nifty50 which gained just 7%. This is because markets are always ahead of the curve (except for any black swan events). Abundant global liquidity and markets sniffing a strong rebound in earnings reflected in markets already commanding peak premium. However, as the strong earnings growth showed up, multiples softened instead of going up, given that it was priced in and further accentuated by foreign institutional investor (FII) driven outflows. This trend, along with recent correction, brought down trailing earnings multiples from lofty levels about a year back by about 43%. Around the same time last year, it was 95% premium over long-term average, now Nifty is just 8% to 10% away from long-term average.