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What is the 18 Month fair value of the Sensex?

Manu Jain | 15 Jul, 2013  | Follow Author | Add to my Favourites 
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Source of Inputs Into The Spreadsheet: Brokerage Reports and BSE


Beta Values were multiplied by weightage in the Sensex for each of the stocks above and totaled to arrive at the beta of the Sensex which stands at 0.976058.

A similar exercise was done with the Debt, Interest, Networth, T. Rate, ROE's for all Sensex scrips above. The outputs were fed into the METHOD I and METHOD II spreadsheets below. It may be noted that the data have been assimilated for FY15E for all companies from brokerage reports. The value of the Sensex thus arrived is an 18 month price target of the Sensex.

Under Method II the author has assumed a zero growth in Sensex earnings just to illustrate his point that even in such a scenario there is 3500 point upside left in the fair value of the Sensex. The author believes that Method I is a more accurate reflection of the fair value of the Sensex, which stands at ~29350.

METHOD I

Sensex

 

FY15E

POST Q4FY13A

 

 

Debt

830469.427

t rate

0.2802528

 

 

Networth

378337.836

Beta

0.976058

 

 

D+E

1208807.26

D/(D+E)

0.687015584

 

 

ROE

21.52995

E/(D+E)

0.312984416

 

 

TGR

5

Interest

96959.6875

RFR

 

WACC

10.3326044

Risk Prem

7.2

7.54

 

Cost of Debt

 

8.403255

WACD

5.773167

 

Cost of Equity

 

14.5676176

WACE

4.559437

 

 

 

 

 

 

 

TGR/WACC-TGR

 

0.93762815

 

 

 

ROE-WACC

 

11.1973456

 

 

 

ROE*WACC

 

222.460457

 

 

 

((TGR/WACC-TGR)*((ROE-WACC)/(ROE*WACC))

 

 

 

 

4.719466

1/WACC*100

 

 

 

 

9.678102

JUSTIFIABLE P/E

 

 

 

 

14.39757

PT

Fair Value of the Sensex

 

29346.56

 

METHOD II

v=100*(E/I)*SQRT((R+G)/(I+F))

 

 

 

 

 

 

 

 

 

 

 

E=EPS

 

 

 

 

 

I=RFR

on corp Bonds

9.83

 

 

ROE

21.52995

 

 

 

 

SQRT(ROCE/I)

 

 

1.479942192

 

 

R

 

 

14.54783175

 

 

G

E Growth

 

0

 

 

F

CPI

 

9.39

 

 

100*(E/I)

 

 

27033.1565

 

 

(R+G)/(I+F)

 

 

0.756911121

 

 

 

 

 

0.870006391

 

 

V

FV of The Sensex

23519.01893

 

 

 

 

 

 

 

 


Disclaimer: The author has taken due care and caution to compile and analyze the data. The recommendations are his/her personal views. He/she shall not accept any liability whatsoever arising from the use of any of the above content. Sources have been mentioned at relevant places in the article. In spite of this, the author does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information.



About Manu Jain

Manu Jain is a Market/Investment Analyst based in Delhi. He can be contacted at [email protected] or his blog http://talkmanujain.blogspot.com/


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Disclaimer: The author has taken due care and caution to compile and analyse the data. The opinions expressed above are only the views of the author, and not a recommendation to buy or sell. Neither the author nor IndiaNotes.com accept any liability whatsoever arising from the use of any of the above contents.