Nearly half of the stocks in the S&P BSE 500 Index are costlier than their average five-year price-to-earnings. That's the highest proportion of stocks trading above their historical valuations in 15 years, according to data tracked by Bloomberg.
As the markets trade near their all-time peak, BSE 500 Index itself is trading at 26.06 times its earnings in the last 12 months, a 31 percent premium over its five-year average.
What Does This Mean?
Such high valuations do not necessarily mean a steep fall in stock prices but indicate lower returns, said a report from brokerage IIFL. It is almost a given that future returns for these stocks will be far lower in nominal terms than what some of these stocks have seen in the recent past, the report said.
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