Despite having a statutory warning by Mutual Fund Companies as "Past performance may or may not sustain in future", past share market price data is quite often used in equity valuation while investing/acquiring equity an

While ascertaining the value of an organisation, normally market price of its shares is taken into consideration for the purpose of valuation. In many of the SEBI regulations too weekly high or low prices of 26 weeks (amounting to 6 months) or some other period is taken into account in fixing prices for ESOPs, substantial acquisitions, etc. Market based approach suffers from certain flaws where the shares are not listed or are thinly traded. It is unsuitable for valuation of a division. If there is an intention to liquidate and distribute assets, market based valuation is not applicable. In cases of merger and amalgamations, if one of the companies is not a listed company, market data is not available for valuation. If the period involves abnormal events like bonus or rights issue, the valuer need to marshal out the results. Political factors, natural calamities, cyclical fluctuations may also adverse the data collected that need to be properly adjusted.