Business Standard

'Quality' stocks come at a premium, valuations have crossed pre-Covid level

The P/E for Bharti Airtel and Avenue Supermarts is currently below the pre-Covid levels. Reliance Industries, Cipla, Havells India, and Eicher Motors have seen the maximum P/E expansion

Following the sharp run-up, returns are expected to plateau.
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In most cases, P/E has expanded despite a downward revision to FY22 earnings estimate.

Samie Modak
The valuation for most ‘quality’ stocks has surpassed their pre-Covid levels following a sharp run-up in stock prices. According to Kotak Institutional Equities’ analysis, one-year forward (FY22) price-to-earnings (P/E) multiple for 30 of 32 top companies across sectors is currently higher than the pre-Covid levels.

The sectors under consideration include automobiles, consumer durables, consumer staples, IT services, pharmaceuticals, telecom, and retail — those which have shown superior resilience to the lockdown and slowdown in the economy.

The P/E (on FY22 basis) for Bharti Airtel and Avenue Supermarts is currently below the pre-Covid levels. Reliance Industries, Cipla, Havells India, and Eicher

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