Analyst's Diary: Bursting the bubble

The bull run in the Indian market has led to bloated valuations. The median P/E of all listed non-BFSI companies is presently 36.2 times, which is expensive given that they usually trade at around 19 times their earnings. Also, a record 426 companies (35 per cent of all large, mid and small-cap companies) are trading above a P/E of 50 times. In contrast, only 129 companies or 16 per cent of all large, mid, and small-cap companies traded at these valuations in 2015. Hence, this story aims to shed light on the pitfalls of investing at extreme premiums.