New Delhi [India], July 21 (ANI): Indian equity markets continue to trade at some of the highest valuations globally, outpacing both developed and emerging market peers, according to a recent report by Nuvama Institutional Equities.
The report highlights that India’s 12-month forward price-to-earnings (PE) ratio stands at 23.3, the highest among major markets worldwide, and 1.6 standard deviations above its 10-year average, signalling elevated valuations compared to historical norms.
Similarly, India’s forward price-to-book (PB) ratio is also high at 3.4, which is 1.3 standard deviations above its decade-long average, making Indian equities notably expensive on both earnings and book value measures.
By comparison, the United States follows with a forward PE of 22.4 and PB of 4.7, with its PE also 1.6 standard deviations above average, but its PB deviation is even higher at 1.9. Other emerging markets, by contrast, are trading at much lower valuations, with Taiwan at a PE of 16.1 and PB of 2.7, the Philippines at a PE of 10.6 and PB of 1.6, Indonesia at a PE of 11.2 and PB of 1.0, and the broader Emerging Markets index at a PE of 12.8 and PB of 1.7.
India’s return on equity (ROE) remains strong, projected at 15.6 percent for FY2025 and 14.5 percent for FY2026, slightly below the US’s expected ROE of 17.1 percent in FY2025 and 18.8 percent in FY2026. Emerging markets on average are expected to deliver ROEs of 11.7 percent in FY2025 and 14.4 percent in FY2026.
On dividend yield (DY), however, India lags behind with a modest yield of 1.2 percent for FY2025 and 1.4 percent for FY2026, among the lowest across key global markets.
Despite these elevated valuations, strong fundamentals, robust ROE, and growth potential continue to underpin investor appetite for Indian equities, the report noted. However, the high valuations have made investors cautious, with Indian indices under pressure over the past 10 months since peaking in September 2024. While markets have corrected significantly since then, they remain expensive relative to global peers, which may limit further upside potential and increase vulnerability to global corrections or domestic policy changes, the report warned.
(ANI)
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