PE of half the Sensex shares drops to 10 or less

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Updated: 12/10/2008 | 03:37 PM IST

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Press Trust of India

Sunday, October 12, 2008 (Mumbai)

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With the stock market taking a severe beating, the PE or Price Earning ratio of 15 out of 30 Sensex shares has dropped to ten or less as of Friday – October 10, according to the data available.

The PE ratio for as many as 11 Sensex shares is in single digits, the data reveals. The PE ratio indicates to what extent market is willing to pay for the company's earnings. PE is typically higher when the market is booming and drops when the sentiment turns bearish. High performing companies generally tend to command higher PE ratios. PE ratio also depends upon liquidity available in the market.

Among the companies whose PE ratios are less than 10 are ICICI Bank (9.9), SBI (9.8), Reliance Comm (8.6), Satyam Computers (9.1), ACC (7.4), Tata Motors (6), DLF (5.9), Hindalco (4.8), Grasim (4.7), Sterlite (4.4). The lowest PE is that of Tata Steel at only (1.7) .

Shares with PE ratio of ten are Reliance Ind (10.9), ONGC (10.5), TCS (10), and Reliance Infra (10.9).

The PE for the Sensex overall was 13.44 as of October 10 largely due to comparatively higher valuations still commanded by shares like HDFC Bank (25.7), the highest among the 30 Sensex shares. Besides, Hindustan Unilever also has high PE of 24.8 and so also BHEL 22.3 and NTPC at 20.2.

The PE ratio is calculated by dividing the market price of a company's share by the earning per share (EPS). While the earning per share is calculated by dividing the net profit of the company by the number of its shares.