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Justified premiums

Stocks of several multinational companies listed in India have outperformed the market in spite of their expensive valuations

Justified premiums

It is generally said that one should not pay too much for stocks. While this advice looks prudent, there are exceptions to this stock-market dictum. Stocks of several multinational companies listed in India have outperformed the market in spite of their expensive valuations. The Nifty MNC Index is trading at a P/E of 30.41 and a P/B of 6.35 against the Nifty 50's P/E of 21.37 and P/B of 3.07 (as on November 15, 2016). Historically, the MNC Index has traded at a premium to the market. But a look at the stock returns and five-year revenue and profit growth suggests that the stocks comprising the MNC Index have indeed performed well. This outperformance can be safely attributed to the superior pedigree of these companies.

Justified premiums