Was looking at P/E ratio of nifty and it seems reasonably priced (~25) despite record-high index level (16,700). It went to as high as 42 in Feb 2021.
How can the P/E level drop so significantly?
Something felt amiss and I looked deeper.
How can the P/E level drop so significantly?
Something felt amiss and I looked deeper.
P/E is ultimately a function of price and earnings.
Price is nothing but the NIFTY level itself and what was needed was historical earnings.
So, when I looked at the history of EPS, something abrupt jumped up.
Notice a sudden vertical increase in earnings to the right?
Price is nothing but the NIFTY level itself and what was needed was historical earnings.
So, when I looked at the history of EPS, something abrupt jumped up.
Notice a sudden vertical increase in earnings to the right?
The date of earnings increase is 31st March 2021. On that date, the earnings suddenly jump by 22%.
Things like these aren't possible.
I was immediately reminded of Twyman's law: vwo.com/blog/twyman-la…
Things like these aren't possible.
I was immediately reminded of Twyman's law: vwo.com/blog/twyman-la…
A bit of googling revealed that the definition of earnings itself was changed by the regulator.
Instead of standalone earnings, from 31st March 2021 onwards, consolidated earnings had to be reported.
etmoney.com/blog/sudden-fa…
Instead of standalone earnings, from 31st March 2021 onwards, consolidated earnings had to be reported.
etmoney.com/blog/sudden-fa…
Amazingly, all financial websites show the same historical P/E graph without indicating the change.
This includes nifty's own website. If you see historical P/E there, there's no info of definitional change.
@NSEIndia this is misleading. please fix
www1.nseindia.com/products/conte…
This includes nifty's own website. If you see historical P/E there, there's no info of definitional change.
@NSEIndia this is misleading. please fix
www1.nseindia.com/products/conte…
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