ET Intelligence group: At 23.5, the trailing price-to-earnings ratio of the 30-stock Sensex is prompting investors to turn to Benjamin Graham and his theory of value investing. From mere growth, investing focus has shifted to intrinsic business value as companies fail to provide clear visi bility on earnings.

Stocks with lower PE multiples have, of late, outshone fancier names and such companies have outperformed the broader BSE 100 index by 4% since June.

Currently , shares of energy , IT, PSU banks, and metals fall in this category , with average PEs at 14.39, 15.54, 12.32 and 17.03, respectively , compared 17.03, respectively, compared with the BSE 100 index PE of 23. The combined market capitalisation of the low-PE stocks constitutes about 48% of the total market capitalisation of the BSE 100 index.

To be sure, the definition of low-PE stocks has changed over the years. For instance, TCS and Infosys are now in this league as their valuations are at 10-year lows, while the broader markets are near record highs.

The earnings progression of low-PE stocks has been quite stable compared with steep projected cuts in growth stocks. In the past year, the one-year forward earn ings of low-PE stocks gained 9%, while that for high-PE stocks rose just 2%.

After the recently concluded June quar ter, the fiscal-year earnings per share growth estimate for companies in the BSE 100 has been pared by four percent age points to 11% and growth stocks saw the sharpest re ductions.

The earnings slippage risks appear low for inexpensive stocks. For instance, the six month consensus EPS growth of Tata Steel, RIL, HPCL and NMDC have risen 33%, 10%, 6%, and 6.6%, respectively.

Furthermore, investors increased their weighting on low-PE stocks to cushion downside risks, and this led to a repricing of growth stocks, facilitating the outper formance in value shares.