Rout on Dalal Street: Valuations come down, but still not in comfort zone

The broader market remains expensive on a historical basis. The Sensex 10-year median price-to-earnings multiple is around 20.4 times, nearly 10 per cent lower than the index's current valuation

The recent rout on Dalal Street has resulted in a sharp drop in the valuation of the broader market and benchmark indices. The Sensex is now priced at 22.8 times its underlying earnings per share (EPS) in the trailing 12-months —the lowest in nearly two years.

Just five months ago in November, 2019, the index was trading 28.4 times its trailing earnings. The index's valuation peaked in May last year, when it was trading at nearly 29 times its underlying trailing earnings.

The current market correction is, however, the sharpest since the second half of 2015, when the index’s price-to-earnings