Big change coming up from NSE i.e the way Index level P/E is Calculated

Did You Know

There is Big change coming up from NSE, i.e the way exchange calculatesIndex level P/E Ratio :

NSE will now use "consolidated earnings" instead of standalone earnings tocalculate Index Earnings.

How NSE computes the Index Level P/E Ratio is given below:

Adjusted total free-float market capitalisation of all index constituents /Total rolling 4 quarters free float PAT of all index constituents.

Source: Press release from NSE & above change is with effect from 31.03.2021)

Impact of the Change:

• Provides a more realistic picture of total earnings
• Makes Index PE more representative
• Indicates Lower Market Valuations

In short, Key Large Cap Indices likely to have Higher Earnings & "Show Lower PE Ratio"

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