PE ratios and stock valuations: A post-pandemic analysis

In early 2020, global financial markets were riding high at levels around 12400, hitting all-time highs just before the COVID-19 pandemic sent shockwaves through the world economy. As the virus spread rapidly, governments around the world implemented stringent lockdown measures to contain it. These lockdowns disrupted supply chains, shut down businesses, and led to widespread economic uncertainty. As a result, the Nifty 50 index in India experienced a significant correction, dropping from an all-time high of 12430.50 to a low of 7511.10, reflecting the widespread panic and economic turmoil caused by the pandemic. 

However, as the situation began to stabilize and economies gradually reopened, the Nifty 50 index made a remarkable recovery. It managed to break through its pre-COVID-19 all-time high and currently trading at 19624.70 at the time of the latest data, marking an impressive resurgence. The Nifty 50’s current level represents a substantial gain of a certain percentage from its pandemic-induced low. 

The provided data shows the Price-to-Earnings (PE) ratios for various stocks as of January 17, 2020, and their current PE ratios, which reflect changes in the valuation of these companies from January 2020 to the current date. 

Three stocks that have gained significant valuation since January 2020: 

Adani Enterprises: The PE ratio of Adani Enterprises has surged from 27.2 to 98.53, indicating a substantial increase in valuation. This could be attributed to the company’s diversification and growth across various sectors. 

Titan Company: Titan Company has seen its PE ratio increase from 73.5 to 90.6, signifying a notable gain in valuation. Titan is a well-known brand in the jewellery and watch industry and likely benefited from consumer demand. 

Divi’s Laboratories: The PE ratio for Divi’s Laboratories has risen from 38.5 to 65.35, showing a significant increase in valuation. The pharmaceutical company may have experienced increased demand for its products and services during the COVID-19 pandemic. 

Two stocks that have experienced a decline in valuation since January 2020: 

HDFC Bank: HDFC Bank’s PE ratio has decreased from 28.4 to 16.97, indicating a notable decline in valuation. This could be due to various economic factors affecting the banking sector and the merger between HDFC and HDFC Bank. 

Bharat Petroleum Corporation Limited (BPCL): BPCL has experienced a significant drop in valuation, with the PE ratio falling from 15 to 3.77. This could be due to changes in the oil and gas industry and various external factors impacting the company’s performance. 

Data is recorded as of October 19, 2023. 

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.