Is Present TTM Nifty PE 22 (as per NSE site) or actually 32?
·
NSE publishing Nifty PE at around 22 at, 24900 is
misleading as it divides Index market capitalization by the Gross earnings of
constituents
·
NSE should divide actual equity capital of Index
constituents by gross earnings of constituents
·
If we consider RIL 1:1 bonus and its effect on
Nifty EPS contribution and other constituent, the actual TTM EPS is 804 in
Q1FY26 vs 789 in Q4FY25 (earlier estimate 909)
·
Further, if we consider HDFC Bank bonus issue
(1:1), the FY26 Nifty EPS should be around 803 vs earlier estimate of 1008
The Nifty 50, India's benchmark stock market index,
has long been a barometer of the nation's economic health. At its core lies the
Earnings per Share (EPS)—a key metric reflecting the aggregate profitability of
its 50 blue chip (?) constituents. As per our NSE site, what NSE is publishing
as Nifty PE is based on market capitalization on the index on a given day
divided by the total/gross TTM earnings of all constituents.
As par NSE
(in response to our e-mail query in late 2024):
·
Methodology as
mentioned hereunder is followed for calculation of Nifty 50 PE ratio:
·
Formula of Nifty 50 PE: Index market capitalization
divided by the Gross earning
·
Index market
capitalization of the Index constituents is the sum total of the outstanding
equity shares considered for index computation multiplied by the close price of
each index constituent adjusted for free-float; and
·
The earnings
(including profits and losses) reported by each index constituent in trailing 4
quarters (consolidated financials) are cumulated, adjusted for free-float, to
arrive at the gross earnings. In case,
consolidated financials are not available, standalone financials for trailing 4
quarters are considered
·
In case overall
earnings value (of all constituents put together) for any index is negative, PE
ratio for such indices are not computed and published by NSE Indices. PE ratio
will be published again from the date when overall earnings value is positive
·
While there may
be different approaches that may be followed for computation of index PE, most
index providers follow the similar methodology as mentioned above.
·
Nifty 50 EPS is
calculated as Nifty 50 index value divided by the Nifty 50 PE for a given day
·
Kindly note that
NSE Indices separately do not calculate and publish index EPS
·
You may also
note that NSE Indices does not compute/ publish FWD PE/EPS
For example, as of date (October 5, 2025), NSE is
publishing the official Nifty PE ratio as 22.01 (LTP: 24894.25) based on the
market capitalization methodology. Based on this NIFTY PE of 22 and index
value 24894, many fintech sites and also many amateur or even professional
investors, analysts, fund house translate underlying TTM Nifty EPS (Q1FY26-TTM)
for the day as around 1131 and wonders why Nifty is not scaling the
September’24 lifetime high around 26300 despite 12 months had gone; at 26300
AND ~1100 Nifty EPS, the PE should be around 24, within best case scenario of
25-27; some even wondered why Nifty is not hitting 30000 levels in FY26 as the
perceived projected Nifty EPS for FY26 must be around 1200, implying historical
10% CAGR.
However, the EPS of a company is always based on
actual TTM earnings divided by TTM equity capital or number of equity shares
O/S. The Nifty/index EPS is the summation of all constituents' EPS as per their
market weightage/free floating factor. As we all know, the EPS of a company is
always related to Equity Capital (number of equity shares), and thus it's fixed
for a QTR or FY, while PE is variable in line with market price. EPS of a company has no relation with the market
capitalization of that company. Similarly,
Nifty or any other stock index EPS should also be based on the actual EPS of
each company/constituent in line with their index weightage. This method shows
FY24 NIFTY EPS around 909 against the official NSE figure (through back-calculation)
of 975, which is almost 7% higher, and thus PE is also 7% higher than being
officially published by the NSE based on pure market capitalization, not equity
capital or number of o/s shares.
In
reality, if we calculate FY25 Nifty EPS after considering EQ dilution of
various index constituents including heavyweight RIL (1:1 bonus issue in FY25),
the Nifty PE should be based on available QTR
(Q2FY26) TTM EPS, which is now around 804 (as per index constituent weightage
ratio). Thus, at around 25000 Nifty Index levels, the TTM Nifty PE should be
around 31, not 22 (as published by the NSE, which may be misleading to amateur
market participants).
As per AI:
Calculation of Nifty EPS is very
simple, not a rocket science
As per our calculation, FY24 Nifty EPS was around
909 and 916 for FY25 without considering equity dilution of key index
constituents like RIL (1:1 bonus), the actual revised figure for FY25; i.e.
TTM-Q4FY25 should be around 789. Similarly, the TTM-Q1FY26 Nifty EPS should be
around 804 vs 762 in Q1FY25-TTM; translating a growth of 5.5%. Further, if we
consider 1:1 bonus of HDFC Bank, the Q2FY26-TTM NIFTY EPS should be around 764
(adjusted 60/- for HDFC EPS dilution); 783 for Q3-TTM and 803 for Q4-TTM; i.e.
FY26 NIFTY EPS should be around 803 after Equity dilution EPS adjustment of two
key index constituent RIL and HDFC Bank. We have estimated earlier FY: 25-26
NIFTY EPS around 916-1008 without considering equity/EPS dilution of key index
constituents like RIL and HDFC Bank and certain other Nifty stocks. Further,
assuming 10% CAGR, the estimated NIFTY EPS for FY27-28 should be around
883-971.
Nifty Fair
Value Projections
NIFTY TTM
QTR EPS Calculation
Conclusions
Nifty EPS, if properly calculated, may not reach
the much awaited 1000 levels before FY28-29. Over the last few years,
regulators has made Nifty index constituents rejig process a terrible
mechanized one, paving the way for even start up loss making or just break even
companies to replace established blue chips just because of trading volume or
so-called market capitalization. This is also causing FPIs exodus as they may
be not so much comfortable with Nifty index quality and also valuation.
Looking
ahead, Nifty earnings (EPS) growth may be subdued as:
·
India’s general
discretionary consumer spending may stay tepid due to weak labor/job
market and higher cost of living
·
Deteriorating
trade & diplomatic relation of India with most of the neighbours and also
the US; exports may get hurt.
·
To get 20%tariffs from Trump, India has to offer the US 15% general tariffs along with
12.5% IGST to all US goods without any ‘sin/luxury tax’; the US has 7.5%
average state sales tax for all goods in various states.
·
With 15% general
tariffs for all US goods with full & fair access under base case scenarios
(BTA) from January 2026, Indian
corporations may face stiff competition.
·
Trump may also
impose 15-25% tax/tariffs on Indian outsourcing services (online or offline) in
response to India’s 18% IGST service tax and to ensure US jobs (in line with
work visa permits).
·
The much hyped
GST 2.0 reform/recalibration may be another dumb squib due to ITC and other
regulatory issues; most of the producers are not ready to cut prices and are warning
about higher costs
·
Overall, Trump
2.0 and GST 2.0 disruptions may cost Indian real GDP a full 50-100 bps in
FY26-27, and Nifty EPS should also be
affected.
·
Higher USDINR
towards 95-100 by FY27-28 may also cause various serious issues for the Indian economy,
including higher cost of living and FPIs exodus.
·
Despite RBI’s
latest banking reforms and efforts to induce banks & financials to lend
more to the real economy, banks may not take excessive risk and continue to
focus on quality rather than quantity; banks will stress on return of capital
rather than return on capital.
·
RBI/Government
seems not much interested in bringing down India’s borrowing costs (RBI REPO
rate) to 4.00%, at China’s levels, to encourage private capex and overall
economic growth/productivity.
·
Too high
borrowing costs for too long are causing a general Indian economic slowdown and
higher unemployment and also causing consistently higher retail NPA.
·
RBI’s new rule
of NPA provisioning on an expected basis (LTM) from FY28 may not help banks.
·
Almost 50% of
India’s discretionary consumer spending and nominal GDP may be linked to
corrupted money, which is reflected in growing public debt; this is also
causing higher inflation and higher LCU (INR) devaluation.
Bottom
line:
If properly calculated, considering diluted Nifty
constituents, the actual TTM (Q1FY26) Nifty EPS is now around 789, and at
around 25000, the TTM Nifty PE is around 32, not 22 as NSE published it on a
market capitalization basis, not actual equity capital.
Technical
outlook: Nifty Future, Bank Nifty Future, and USDINR
Looking
ahead, whatever may be the narrative, technically Nifty
Future (CMP: 25150) now has to sustain over 25350 for a further rally
towards 25650*/25850*-26050/26100 and further to 26300-26500 in the coming
days; otherwise, sustaining below 25300-25200, Nifty Future may slip to
25100/25000-24900/24750 and further to 24600/24500-24400/24300 and 24000 in the
coming days
Technically,
Bank Nifty Future (56300) now has to sustain over 56600 for a rally to 57000/57900 and only after
sustaining 58100, may further rally to 58500/58900-60500/61000 and a further
61500-65750 in the coming days; otherwise, sustaining below 56500-56300, BNF
may again fall towards 56000/55400-54900/54600 and 54400/53900*-53500*/53000
and 52500*-52000/51500 and further 51000/50500-50000/49700 and 49200-47700 in
the coming days.
Technically,
USDINR-I now (88.90) has to sustain over
89.50 for a further rally to 90.00/90.50-91.00/91.50 and 92.50-94.50 in the
coming days; otherwise, sustaining below 89.00/88.50-88.00/87.50, USDINR may
again fall to 87.00-86.50/86.00-85.50/85.00 and 84.00-83.50 in the coming days.
Disclaimer: I
am an NSE-certified Level-2 market professional (Financial Analyst- Fundamental
+ Technical) and not a SEBI/SEC-registered investment advisor. The article is
purely educational and not a proxy for any trading/investment
signal/advice. I am a professional
analyst, signal provider, and content writer with over ten years of experience.
All views expressed in the blog are strictly personal and may not align with
any organization with, I may be associated.
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