The Indian equity markets have been on a strong bull run. On June 3, both the Nifty 50 and Sensex touched fresh all-time highs. Sensex even touched the 80,000 mark for the first time.

With this rally, some concerns have also cropped up the valuations across several sectors. In its latest bull-and-bear handbook, Motilal Oswal dissects how different sectors are trading currently.

Auto

The Nifty Auto index has surged over 35% in the last six months, but Motilal Oswal’s analysis shows that the sector is still trading below its historical levels.

The brokerage firm said that the auto sector is trading at a price-to-earnings (PE) ratio of 25.6x, which is below its 10-year historical average of 27.1x, representing a 6% discount. On a price to book ratio (PB) basis, however, the sector is trading at a 44% premium to its 10-year average of 3.4x.

Private Banks

Motilal Oswal’s analysis of the Private Banks sector indicates that it is currently trading at a PB ratio of 2.4x, slightly below its 10-year average of 2.5x, representing a 4% discount. The sector’s return on equity (RoE) stands at 15.2%.

The analysts added that credit quality for most banks has been robust, leading to controlled provisioning expenses. However, there is caution regarding ongoing developments around farm loan waivers, which could potentially increase credit costs in unsecured segments, primarily microfinance institutions (MFIs).

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PSU Banks

The Nifty PSU bank index has surged up over 25% in the past six months and analysts at Motilal Oswal think that the sector is now trading at a premium. Motilal Oswal’s analysis of the public sector undertaking (PSU) banks sector reveals they are trading at a PB ratio of 1.3x, which is a 57% premium to their historical average of 0.8x.

The analysts said that PSU banks have maintained strong profitability due to improvements in both asset quality and operational performance.

Loan growth continues to be driven by the retail, agriculture, and micro, small and medium enterprises (RAM) segment. Margins are expected to remain range-bound with a slight negative bias, the brokerage said; however, a higher mix of marginal cost of funds based lending rate (MCLR) will limit the overall impact.

Real Estate

The real estate sector is currently trading at a PE ratio of 54.8x, which is a 94% premium to its 10-year historical average of 28.2x, as per the brokerage house’s analysis.

In the year ended March, pre-sales from the top 14 listed developers reached a new peak of ₹1.10 lakh crore, representing a 41% year-on-year (YoY) increase.

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Disclaimer: This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors.