Key Points
The Nifty 50 index has gained nearly 3% in 2024 so far, but the broader markets have outperformed the benchmark as the Nifty Smallcap 100 rallied 6.8%, while the Nifty Midcap 100 index surged 7.7% YTD..
The Nifty is trading at a 12-month forward P/E ratio of 19.4x, which is largely in line with its long-period average (LPA) of 20.3x even as broader markets trade at expensive valuations - the NSE Midcap 100 index trading at 46% premium to Nifty..
Among companies trading at a significant premium to their historical average include Grasim Industries, whichtrades at a 74% premium, followed by Bajaj Auto (66%), Reliance Industries (62%), Adani Ports & SEZ (47%), and HCL Technologies (43%)..
Capital Goods Sector: The Capital Goods sector is trading at 44.6x one-year forward P/E, above its 10-year average of 30.8x, a 45% premium, indicating a potential fair valuation amid anticipated capex growth..
Private Banks: The Private Banks sector is currently trading at a P/B ratio of 2.3x, which is below its 10-year average of 2.5x, representing 11% discount, while its RoE stands at a 10-year peak of 15.6%..
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Are Nifty stocks, sectors expensive at current valuations? Let's check history
06, Oct, 23Nifty stocks that are trading at a significant discount to their historical averages are ONGC (-45%), BPCL (-41%), Tata Steel (-38%), Apollo Hospital (-31%), and Eicher Motors (-28%). As a sector, PSU banks are trading at a P/B of 1.1x, at a 30% premium to its historical average of 0.8x while the consumer sectors P/E of 41.7x implies a 4% premium to its 10-year average of 40x. Similarly, technology is trading at a P/E ratio of 23.2x, an 18% premium to its long-term average of 19.6x.