Nifty is once again trading at 2% premium to 5-year average P/E multiple

The consensus earnings estimates for Nifty 50 companies saw a three per cent downward revision in April. The cut in Nifty earnings estimates coupled with a six per cent jump in the index has led to an increase in the index’s price-to-earnings (P/E) multiple. According to Nomura, Nifty’s one-year forward P/E multiple has increased from 16 times in March to 17.1 times at the end of April. 

Following a 10 per cent drop in the markets from 2018 highs, the P/E multiple for Indian markets had realigned to their long-term trading average. However, the Nifty is once again trading at a two per cent premium to its five-year average P/E multiple. Among Nifty companies, the largest cut in consensus earnings estimate was seen in UltraTech Cement, Coal India and Titan. On the other hand, Bajaj Finserv, Tata Steel and Vedanta saw the highest upward revision in their 2018-19 consensus earnings estimate, data compiled by Nomura show.