Source: NSE, 2020
Nifty P/E ratio
|14th Jan 2020||28.67|
|16th Mar 2020||20.93|
|19th Mar 2020||18.63|
Due to coronavirus fears and oil prices war, all global stock markets have fallen drastically in the past few weeks. Nifty has fallen by nearly 30% from its last peak.
One effect of this can be seen in the above graph, here the Price-to-Earnings ratio has been declining from 20 Jan 2020 when Nifty touched its all-time high.
A decrease in Nifty PE ratio can be seen as an opening opportunity for investing in equity markets.
Historically, whenever the Nifty PE ratio is below 22, the 3-year return has been positive.
This could be a good time to increase investment allocation in the equity market.