How was the Nifty PE in the 2008 Financial Crisis ?

Market Crash

How was the Nifty PE in the 2008 Financial Crisis ?

The National Stock Exchange’s Nifty50 Index PE (Price to Earning) was 19.52 on Last Friday – 27th March, 2020. Earlier in that week, it was 17.15 on PE was a buying opportunity for the Stocks – 23th March, 2020.

One of my investment buddy, Mr. Dev Asish, the Founder of Stable Investor (He is a SEBI Registered Investment Advisor (RIA) ), had posted an article few years before about the guide to investing in Stock Market based on Nifty PE Ratio.

Nifty PE based investing

Don’t take the above instruction as an Investment advice. However this Price to Earning (PE) ratio of Nifty50 gives some insight into the Equity Market. That is, when you analyze a bunch of stocks with Good Fundamentals and you are planning to decide to buy that stocks – Now it’s the time to look at the Nifty PE, whether i buy it today or later.

While the Global Indices has claimed that the Covid-19 is currently taking place, but the Global Stock Market has been at peak for the past few years, followed by the recession of many countries.

Generally, the Stock Market valuation is good, if it depends on the Company earnings and the GDP of the Country. Otherwise, we may know that they are contradictory. Currently, most of the Listed Companies were struggling to make better earnings and the Economic Growth has been declining for the past six quarters. But only the stock market have boomed without any consensus.

Finally, the Stock Market has been down for the past few days following the Coronavirus – Covid-19 incident. There is still a chance to see more fall in the upcoming days, if the same scenario persists.

Let’s see at the value of PE for the Nifty50 during the 2008 Economic Crisis,

I had already said that the Current Nifty50 PE is around 19.50 which was traded in the last Friday. On 1st January, 2008 – the Nifty50 PE was said to 27.64 which was similar to the first week of January of this Current year. On 6th Jan, 2020 the Nifty PE was around 27.90, so the Nifty traded at 12,000 Points.

The First January of 2008, the Nifty50 Price to book value is 6.40 and the Dividend yield is around 0.84 Percent. At the end of March, 2008 the Nifty50 Price to Earning ratio is 20.63 which is good compared to the first quarter of the year 2008.

On 1st April 2008, the Nifty50 PE is around 20.65, the Price to Book value (P/B) is said to 5.09 times and the Dividend yield is near by 1 Percent. So, one can understand that when the Price to earnings are declining, then the Price to book value is also gets cheap and the dividend yield is go up.

Nifty Historical PE Ratio - 2008 Financial Crisis

At the end of June 2008, the Nifty PE was traded at 17.28, the P/B was said to be 4 times and the Dividend yield is now 1.35 Percent. So, one can start their investments as per the above Nifty PE Table. In the earlier June, 2008 – the Nifty PE was around 16.70 and it was closed with 16.85 in the end of September 2008. On that said quarter, the Price to book value is around 3 times and the Dividend yield is near by 1.5 Percent.

From October to December 2008, the Nifty50 PE was falling down to 13 from the ratio of 17. On 27th October, it was luckily traded around 10.70, the Price to book value is also cheap at 2 times and the Dividend Yield is more than 2 Percent, which is good for the Value Investing.

In the earlier January of 2009, the Nifty was traded at 13 and then it was moved to 20 in the mid 2009. Finally, the Nifty PE was traded at 24 in the month of January 2010. This is the thing that i want to convey here, how the investing opportunities comes around when there is a Fear.

Yes, It’s Panic and Pandemic – But you should know the Survival of the Fittest.

Kindly share your views / comments with a smile 🙂


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