The Nifty Smallcap 250 index is trading at a PE of 100-plus, which implies investors are looking for a doubling of earnings within a year. While individual businesses, especially small businesses starting from a low base, can double earnings within a year, it is utterly impossible for a batch of 250 companies spread across multiple sectors to do this.
Calculating backwards using the NSE data, earnings for this set of 250 companies have actually grown by 10 per cent between April 2016 and February 2018. That compounds out to just over 5 per cent per annum. An EPS growth rate
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