Analysts said India’s stock market valuations are higher compared to most long-term averages and to its regional peers. The Price to Earnings (PE) Ratio – a popular measure to measure valuations- of the benchmark Nifty is 22.19 times. This is lower than the five-year average of 24.79 times and almost in line with the 10-year average of 22.53 times.
This means India’s valuations are more or less similar to or lower than long-time averages, but they have still not fallen to levels that give investors comfort to put money aggressively.
In comparison, data show valuations of mid- and small-caps are cheaper compared to their five-year average. Shares of smaller companies have performed better than their large-cap peers so far this year because their valuations, as measured by PE ratio, were cheaper.
Compared to MSCI Emerging Markets Index, MSCI India’s PE ratio is almost at a 100% premium. The run-up in shares of technology giants in the US drove up the Nasdaq in 2023, resulting in its PE ratio catching up with the long term averages.