Ask any brokerage firm or an investment bank or an institutional investor – they will all agree that the Nifty is currently expensive, as compared to its long-term average valuation. But is this comparison fair, questions the managing director of a foreign securities firm. How can one compare the valuation of the present Nifty, which has Tata Consumer and Adani Enterprises as its constituents, to a Nifty that once had GAIL and Shree Cement? The price-to-earnings ratio of each of these companies are poles apart! The benchmark is surely expensive compared to its LTA, the expert believes, but the quantum of overvaluation might be lesser than the numbers being thrown around. Food for thought, isn’t it?
