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)
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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