Major market indices like the Sensex and Nifty have hit new all-time highs in the recent past due to continued inflow from foreign portfolio investors (FPIs). Since the earnings growth of Indian companies is still low, this has pushed up market valuations, thereby increasing risk. The Sensex’s trailing 12-month PE is significantly higher than what it was in 2008. Low Sensex EPS, due to huge losses by a few companies, is the main reason for the high Sensex PE.
