Information Technology giant Tata Consultancy Services Ltd. has historically traded at a premium to the benchmark Nifty 50 Index in terms of its price to earnings (P/E) ratio.
The company's P/E has always maintained at least a 2-point difference with that of the Nifty in the last five financial years.
In financial year 2010-11, TCS' P/E stood at 25.6 times against Nifty's P/E of 13.8 times. The company maintained this premium in the next financial year as P/E for TCS stood at 22 times against the Nifty's 16.1 times.
This trend has seen up to financial year 2015-16 when TCS' P/E stood at 20.5 times against 18.3 times for the Nifty.
But the gap has now narrowed in this financial year with TCS' P/E standing at 17 times, just marginally higher than that of Nifty's P/E of 16.5 times.
This narrowing gap could indicate an inflection point for TCS even as earnings growth expectations for the company remains muted for the next few quarters.
That's our chart of the day.
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