Sensex Price Target Calculation

[Nimish Shah]

How Sensex price target calculated

Lot of fund managers and analysts give price target for Sensex every year

But it’s not rocket science most of them give it by multiplication of two figures

EPS (Earning Per Share) * PE (Price Earnings Ratio)

Sensex Price target = EPS (Estimated) * PE (Estimated)

For example if we want Sensex price target for financial year 2015-16 then

Sensex Target = EPS (1608) * PE (20) = 32160

Above calculation seems easy but we have to see its limits also.

Sensex EPS is depend upon EPS of 30 companies include in Sensex.

If 5/6 big companies estimated EPS get wrong then target also get affected.

From Dec. 2007 to Jan. 2008 Sensex gains was 1000 ever week and it was at 21200.

And that time PE was 28 which were extreme high though some Gurus gave target of 25000 that time.

On believe them whom did not take profit and keeps their investment continue, what happened was history.

Now PE is 20 so it’s not high but do not use only above calculation for investing.


Thanks

Nimish Shah

 

[Steve_1982]

8 years is one economic cycle for businesses. New series of cars and home appliances tend to come out every 8 years or so.

P/E of 16 may be a more safer entry for indexes as it takes into account 2 business cycles.

 

[PUCHU_2500]

(I am very sorry my poor language....)
You may project or calculate any numbers, any target of an instrument......
example:-
suppose today NF is closed at say Rs. 7550.
You know the market is down, you may project its lower level say 7200 and higher level is 7700 for the month. but no any means that it must touch 7200 or 7700.....with this two figure you must be able to decide the trend day by day.....if it is going towards 7200 you are confirmed bearishness is still existing and if going towards 7700 you are confirmed that it is going for correction or trying to catch bullishness.....thus your trading skill or trading decision will be developing.....

 

[Nimish Shah]

(I am very sorry my poor language....)
You may project or calculate any numbers, any target of an instrument......
example:-
suppose today NF is closed at say Rs. 7550.
You know the market is down, you may project its lower level say 7200 and higher level is 7700 for the month. but no any means that it must touch 7200 or 7700.....with this two figure you must be able to decide the trend day by day.....if it is going towards 7200 you are confirmed bearishness is still existing and if going towards 7700 you are confirmed that it is going for correction or trying to catch bullishness.....thus your trading skill or trading decision will be developing.....

Not able to understand what you want to say. Kya aap hindi me likhoge ?

 

[ganesh21341981]

while selecting MF, do we need to consider P/E of sensex also?