Only 14% of the time Nifty has been more expensive than current level
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The Nifty rallied 10.5 per cent during the April-June quarter and was the 4th best performing index after Brazil (+15.9 per cent), Japan (14.2 per cent) and Russia (14.1 per cent), foreign brokerage, CLSA said in a report.
Nifty outperformed the EM benchmark by 10.6ppts. China (-7.8 per cent) and Hong Kong (-7.3 per cent) were the worst performing markets followed by Thailand (-6.6 per cent).
The premium of the Nifty 12-month forward PE is getting close to the extended zone as only 14 per cent of the time the Nifty has been more expensive than the current level, the report said.
The Nifty's consensus FY24/FY25 EPS saw a downgrade of 1.0 per cent/1.4 per cent while most EMs saw a bigger 4 per cent-9 per cent cut in EPS.
India is still expected to deliver the highest two-year EPS growth among the top 19 equity markets in the world, CLSA said.
The Nifty's stellar performance took its 12-month forward PE from 17.4x at the start of the quarter to 18.6x, which implies a 17.7 per cent premium to its average. Only about 17 per cent of the trading days since 2005, the Nifty has been more expensive than the current PE, the report said.
Taiwan (91st percentile), the US (90th percentile) and Korea (89th percentile) are at more extended valuations than India considering their respective historical trading ranges. This outperformance has taken India's valuation premium to the EM as well as Asia ex-Japan benchmarks to +1 std. of the long-term average. India's valuation premium versus China is also well above the past 10 and 15 year averages, the report said.
Mid and small-cap outperformed the Nifty & growth was the best performing style. Realty, auto and telecom were the top performing sectors, the report said.
Small and midcap indices outperformed the Nifty 10ppts and 8.5ppts. About 60 per cent of the Nifty’s constituents outperformed the Nifty led by Tata Motors, Adani Enterprise and HDFC Life. Infosys and UPL were the only Nifty stocks to deliver a negative return, the report said.
Growth proved to be the best performing style during the quarter as the top-quintile growth stocks beat the Nifty by 9.3ppts followed by a 2.3ppt beat by top-quintile momentum names. The top-quintile value stocks underperformed by 0.3ppts.
