Analyst's Diary: Bursting the bubble

The bull run in the Indian market has led to bloated valuations. The median P/E of all listed non-BFSI companies is presently 36.2 times, which is expensive given that they usually trade at around 19 times their earnings. Also, a record 426 companies (35 per cent of all large, mid and small-cap companies) are trading above a P/E of 50 times. In contrast, only 129 companies or 16 per cent of all large, mid, and small-cap companies traded at these valuations in 2015. Hence, this story aims to shed light on the pitfalls of investing at extreme premiums. Based on the data points presented, it is evident that euphoria is running wild in the market, and valuations are at