Academic journal article Journal of Financial Management & Analysis

Indian Stock Market P/E Ratios: 1998

Academic journal article Journal of Financial Management & Analysis

Indian Stock Market P/E Ratios: 1998

Article excerpt

Uptil now very little research has been carried out on Indian Price-to-Earnings (P/E) ratios. This book provides a comprehensive historical and up-to-date information and analysis pertaining to Indian P/ E ratios. The authors have done a concise analysis on Indian stock markets development and behaviour through changing P/E ratios. The focus of study has been the market's average P/E ratio and its use as an important market signal. Apart from this, the study prescribes a new approach about evaluating an appropriate level of PIE ratio during investment analysis of individual companies. The shortterm movements of the market's average P/E ratio has been analysed, and the authors conclude that the Indian market has been a "bubble market" till now, and not a market governed essentially by economic fundamentals, which is an unhealthy trend. The long-term historical analysis of change in Indian P/E ratio covers all listed companies for which data about individual companies was available from Bombay Stock Exchange and factors underlying long-term change has been discussed. A lucid presentation of the historical series of earnings yield, dividend yield and dividend yield and dividend payout ratio related to P/E ratio has also be given. The authors have provided appropriate benchmarks to evaluate the Indian market's average P/E ratios.

A significant feature of the book is the presentation of a new concept of "justifiable P/E ratio" based on Earnings-Per-Share (EPS) growth rate to evaluate individual company P/E ratios. …

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