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Key Points

Indian equities remain the most expensive globally with PE ratios far exceeding developed and emerging markets. Despite recent corrections, valuations sit 1.6 standard deviations above historical averages. While fundamentals like ROE remain strong, low dividend yields and premium pricing raise investor concerns. The report suggests these elevated valuations may limit upside potential amid global uncertainty.

Key Points: Indian Equities Most Expensive Globally Says Nuvama Report

  • India's PE ratio exceeds US and EM peers by wide margins
  • Valuations remain elevated despite recent market corrections
  • Dividend yields among lowest globally at 1.2%
  • Strong ROE of 15.6% supports premium valuations
2 min read

Indian equities are still more expensive than equities of developed and emerging markets: Report

India's PE ratio at 23.3 leads global markets, with valuations 1.6x above historical averages despite recent corrections, says Nuvama.

"India's 12-month forward PE ratio stands at 23.3, highest among major global markets - Nuvama Institutional Equities"

New Delhi, July 21

India continues to be one of the most expensive equity markets in the world, according to a latest report by Nuvama Institutional equities.

Nuvama research highlighted that the country's 12-month forward price-to-earnings (PE) ratio stands at 23.3, which is the highest among major global and emerging markets.

It is 1.6 standard deviations above its 10-year average, indicating elevated valuations compared to historical levels.

The report also shared that India's 12-month forward price-to-book (PB) ratio is also high at 3.4, which is 1.3 standard deviations above its 10-year average. This makes Indian equities significantly more expensive on both earnings and book value metrics.

In comparison, the United States follows closely with a 12-month forward PE of 22.4 and PB of 4.7.

While the U.S. PE ratio is at the same deviation from its 10-year average (1.6) as India, its PB is at a higher deviation of 1.9.

Other emerging markets like Taiwan (PE 16.1, PB 2.7), Philippines (PE 10.6, PB 1.6), and Indonesia (PE 11.2, PB 1.0) are trading at much lower valuations.

The broader emerging markets (EM) index has a forward PE of 12.8 and PB of 1.7, making India relatively more expensive.

India's return on equity (ROE) remains healthy, projected at 15.6 per cent for FY2025 and 14.5 per cent for FY2026. This is slightly lower than the USA's ROE of 17.1 per cent for FY2025 and 18.8 per cent for FY2026.

Emerging markets on average are expected to deliver ROE of 11.7 per cent in FY2025 and 14.4 per cent in FY2026.

Also, in terms of dividend yield (DY), India's yield is among the lowest across key equity markets at a modest 1.2 per cent for FY2025 and 1.4 per cent for FY2026.

Despite the premium valuation, strong fundamentals such as high ROE and growth potential continue to support investor interest in Indian equities.

These high valuation concerns have made the investors cautious for the Indian markets and the indices are in pressure from last 10 months with last high was made in September 2024. The Indian markets have corrected significantly but still the valuations as per report are high.

The elevated valuations may limit upside potential and increase vulnerability to global market corrections or domestic policy shifts.

- ANI

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Reader Comments

S
Sarah B
As a long-term investor in Indian markets, I'm concerned about the low dividend yields. Just 1.2%? That's barely keeping up with inflation. Companies need to share more profits with shareholders rather than just chasing growth all the time.
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Ananya R
Bhai, these high valuations are scaring small investors like me 😅 Every time I want to invest, the market seems overpriced. Maybe better to wait for correction? But then FOMO hits when market goes up again... classic Indian investor dilemma!
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Karthik V
The report misses one key point - India's demographic dividend. We have the youngest population among major economies. This growth potential justifies premium valuations to some extent. But yes, caution is needed at these levels.
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Michael C
Interesting to see US valuations are actually higher on PB basis (4.7 vs India's 3.4). As a foreign investor, I find Indian markets attractive despite premium PE because of the growth runway. The reforms in infrastructure and manufacturing are game-changers.
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Priya S
The real issue is retail investors blindly pouring money into small and midcaps without understanding valuations. SEBI should do more to educate investors about risks. Many stocks are trading at ridiculous PEs of 50-100 with no fundamentals to support!
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David E

We welcome thoughtful discussions from our readers. Please keep comments respectful and on-topic.

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