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[hfe_template id='11223'] [ad_1] Synopsis Not only at the individual stock level, but also at the index level, using the PE ratio as the anchor for your investing decisions is best avoided. Consider this: At the end of calendar year 2020, the price to earning (PE) ratio of Nifty was at 37; today it is just above 22. So, the question is: Were stocks expensive at the end of 2020; and are they cheap today? Here’s another example: Twelve years back, the stock of an MNC company was quoting at a PE multiple of 44 at a time the Nifty’s PE was at 25. Since then, the company’s market capitalization is up 10 times and its PE today stands at 63. So, if you had decided to buy or sell the stock based on its PE number, you would have lost a great opportunity to create wealth. As there is always the chance of going wrong in the market, caution and a long-term perspective should be your mantras. But there are times when thinking before deciding becomes even more important. We are in tho...

[hfe_template id='11223'] [ad_1] Synopsis As there is always the chance of going wrong in the market, caution and a long-term perspective should be your watchwords. But there are times when caution – thinking before deciding – becomes even more important. We are in those times. Reason: While short-term selling pressure might have reduced, the possibility of headwinds is high – from the slowdown in the economy to global level issues becoming a reality. In such times, give some importance to value. Now, one of the most used – or should one say unknowingly misused – ratios is the price-to-earning or PE ratio. At a time the market is adjusting to the Q2 earning season, relying on this ratio could lead to more wrong decisions than right. A better option is the PEG ratio. It is tougher to calculate as it has an element of projection – but it gives a better idea of the health of a company. Consider this example: Twelve years back, the stock of one MNC company was quoting at a P...