After the recent rise, the BSE Sensex trades at 23 times, trailing 12-month EPS and 21 times FY23E EPS.
While it is difficult to predict the market, said Rahul Shah, Co-head of research at Equitymaster, there is a 70 per cent chance that Sensex and Nifty50 may stay where they are or head lower in the next 3-4 months.
“Valuation-wise, we are almost at fair or slightly overvalued levels and earnings are unlikely to surprise on the upside,” he said.
The elevated valuations do not justify further run-up in the market, said V K Vijayakumar, Chief Investment Strategist at
“Some profit-booking and diversion of money to fixed income may be considered as a short-term strategy. Buy on dips can be considered in high-quality financials, leading names in capital goods and autos,” Vijayakumar said.
Shah of Equitymaster told ETMarkets that it has been seen in the past that investments at a Sensex trailing 12-month PE or 25 times and above generally result in not-so-great returns in the next 2-3 years. At PE of 20-21 times, the returns have mostly been pretty decent, he said.
“Right now we are trading at a trailing PE of 23, neither cheap nor expensive. I would suggest that out of Rs 100, keep Rs 50 in stocks and keep aside the rest Rs 50 to buy on dips,” he said.
said it remains constructive on the overall markets and believes the present market offers an attractive risk-reward play to build a long-term portfolio of quality companies, which have lean balance sheets, are capital efficient in nature, and have growth longevity. It values Nifty50 at 19,425 i.e. 21 times PE on FY24E EPS of Rs 925.
“The upside from here on will be a function of stability in global and local macros, and continued earnings delivery versus expectations,” the brokerage said.
(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of Economic Times)