- July 29, 2022
- Posted by: Ramkumar
- Category: Posts
Valuation Of NIFTY 50
Over the last two weeks, 𝗜𝗻𝗱𝗶𝗮𝗻 𝘀𝘁𝗼𝗰𝗸 𝗺𝗮𝗿𝗸𝗲𝘁𝘀 𝗵𝗮𝘃𝗲 𝗯𝗲𝗲𝗻 𝗿𝗲𝗱, and many analysts attribute this correction to 𝐩𝐨𝐥𝐢𝐭𝐢𝐜𝐚𝐥 𝐜𝐫𝐢𝐬𝐞𝐬 𝐥𝐢𝐤𝐞 𝐑𝐮𝐬𝐬𝐢𝐚’𝐬 𝐚𝐭𝐭𝐞𝐦𝐩𝐭 𝐭𝐨 𝐢𝐧𝐯𝐚𝐝𝐞 𝐔𝐤𝐫𝐚𝐢𝐧𝐞.
Thus, i 𝐝𝐞𝐜𝐢𝐝𝐞𝐝 𝐭𝐨 𝐯𝐚𝐥𝐮𝐞 𝐍𝐈𝐅𝐓𝐘 𝟓𝟎 to check if this correction is due to #macroeconomic problems. If that is the case, it is an opportunity for me to invest money in stocks.
As of today morning, the 𝐍𝐈𝐅𝐓𝐘 𝟓𝟎 𝐢𝐧𝐝𝐞𝐱 𝐯𝐚𝐥𝐮𝐞 = 𝟏𝟕,𝟏𝟗𝟐.𝟐𝟓
I looked at all the stocks in the NIFTY50, and i got the 𝗮𝘃𝗲𝗿𝗮𝗴𝗲 𝗥𝗢𝗘 𝗳𝗼𝗿 𝘁𝗵𝗲𝘀𝗲 𝘀𝘁𝗼𝗰𝗸𝘀 = 𝟭𝟱.𝟲𝟯%
EPS = 777.90
Dividend Yield = 1.25%
Dividend Payout ratio = (Dividend Yield * Index value)/EPS = 27.63%
I assume that companies in #nifty50 engage in stock buybacks and pay dividends.
Thus i assume 𝗗𝗶𝘃𝗶𝗱𝗲𝗻𝗱𝘀+𝗦𝘁𝗼𝗰𝗸 𝗯𝘂𝘆𝗯𝗮𝗰𝗸𝘀 𝗮𝘀 % 𝗼𝗳 𝗘𝗣𝗦 = 𝟯𝟬%
Last year’s #eps growth was around 72%, which was a great year as companies posted impressive results after COVID. I assume the EPS growth for 2023 and 2024 as 35% and 30%, respectively.
When i factor the above inputs, 𝐈 𝐯𝐚𝐥𝐮𝐞 𝐭𝐡𝐞 𝐍𝐈𝐅𝐓𝐘 𝟓𝟎 𝐚𝐭 𝟏𝟓,𝟗𝟔𝟎.𝟒𝟑 𝐬𝐭𝐢𝐥𝐥, 𝟕.𝟕𝟐% 𝐨𝐯𝐞𝐫𝐯𝐚𝐥𝐮𝐞𝐝.
Thus, in my view, 𝗡𝗜𝗙𝗧𝗬 𝟱𝟬 𝗶𝘀 𝗻𝗼𝘁 𝘂𝗻𝗱𝗲𝗿𝘃𝗮𝗹𝘂𝗲𝗱, and in the future, i assume that the index should trade around this figure.