Small, midcap valuation premium over benchmarks shrinks

The valuation premium of the BSE Midcap and Smallcap indices over the benchmark S&P BSE Sensex has shrunk to its lowest level in the last one year after the recent correction in the share prices of midcap and smallcap stocks.

- KRISHNA KANT

The BSE Midcap index is currently trading at a trailing price to earnings (P/E) multiple of 26.2X while the BSE Smallcap index is trading at a trailing P/E of around 29X. In comparison, the Sensex is trading at a trailing P/E multiple of around 25X currently.

The midcap index is down 4.5 per cent during March 2024 so far, while the smallcap index corrected by 10 per cent in the period. In contrast, the Sensex is up by around 0.4 per cent month to date.

In March last year, the midcap and smallcap indices were trading at a small valuation discount to the Sensex. The midcap index was trading at nearly 21.9 times its underlying trailing earnings per share (EPS) at the end of March last year, while the smallcap index was trading 22.1 times its trailing EPS. This was lower than the Sensex's trailing P/E of 22.4X at the end of March last year.