Friday, August 25, 2006

Indian stock market.........valuations revisited!

Be cautious on India among emerging markets seems to be the theme these days, both according to domestic and international fund houses. According to them, India is among the more expensinve emerging markets today in terms of equity valuations. But are current valuations really expensive? NSE has the P/E, P/B and the Dividend yield data for the NSE Nifty index going back seven years, ie. from 1 Jan 1999. Following are the charts reflecting these:













































Each of the above three valuation parameters are not too far from their seven years average levels. One can, therefore, say that Indian markets are currently fairly valued. Definitive moves from here on will have to necessarily be driven by higher earnings accumulation.....not just growth. Till such time I think the markets will consolidate and stay at around current levels, within a band of say 5-10%. I had done a similar study a few months ago.

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