Falling Markets? Are PE ratios too high?


Are the markets over heated? Are the PE ratios too high? are 2 questions that I have been asked a million times – right from the markets being at 3500 to 21000. And I have not been able to answer them. Only now I realised that the old definition of PE ratio – is the Price Earning Ratio. The new definition of PE RATIO is PERSONAL EGO RATIO of the Chairman of the group. Each group has a Promoter ego to Market capitalisation ratio. Thus as the market capitalisation of a “group” increases, the Chairman thinks he is causing the increase! Now if the market comes to say 15k (sensex), surely a few egos will be pricked.

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