However, many experts believe that looking at a ratio alone will not help investors understand the realities of the market, and that a higher valuation may not be the only decision -making factor that directs the market.
” Valuations are important in the long run, but there is no effect in the short term. The reason for this is that there is never a correct valuation for a stock because it is an extremely individual call, ” he says.
” For example, because there is more demand for the stock due to higher the possibility of earnings, a share of higher P/E may be progressing further. In other words, there is always some confusion about the right valuation, ” he adds.
” If you look at the wider market, it is difficult to get a value selection. However, if you are doing a method from below, you will find many shares with the right valuation in the market, ” says Rajiv Thakkar, CEO of Parik Parikh Financial Consultancy Services. Although he is a solid believer in value investment, he says that it would not be the right way to invest in a stock to look at a ratio alone.
” There are many things to consider. For example, you should find out if the growth rate is sustainable or how much capital needs to protect growth. Sometimes there would be volume growth, but margins may be under pressure. There are a number of problems to be considered, it is not enough to look at a rate, ” he adds.
” Current values do not justify India’s long -term growth potential. In 2011, Sunday is 17 times the earnings potential and about 13.8 times the earnings forecasts for 2012. Delta Global Partners’s founder and manager Devendra Nevgi carries approximately 50% and approximately 25% premium premiums to other developing markets, ” he says. Foreign investors believe that the premium may be justified if they continue to bet on Indian stocks.
