sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing | GST - Goods and Services Tax
Latest Expert Exchange
« Markets »
 FM calms nerves, says no plan to tax market gains
 Why we must tweak the market-led model
 PE transactions prompt income tax queries over round tripping concerns
 Amended India-Mauritius tax treaty only covers investments in shares
 Government drops cap gains tax on startup shares held for 2 years
 Tax-free bonds regain demand in the secondary market
 Relevant Market’ Under Competition Act, 2002
 Indian markets best in terms of earnings momentum, price revision
 How India will become a common market with GST
 Broader markets outperform; Nifty holds 8,500
 Have Indian markets run ahead of fundamentals?

For some, Indian shares are still expensive
June, 20th 2008

The possibility of a further de-rating for India is gaining ground, with market mandarins terming the country as pricey at over 17 times price-to-earnings.

Even after the 5-month-long bearish phase and a near-29% dip from the top, Indian shares are still considered expensive vis--vis emerging equity hubs. In end-May, it was trading at a 45% premium to the average for emerging markets, analysts maintain.

Although macro fundamentals have turned lacklustre and investor sentiment is at an all-time low, Indian stocks are still running ahead of weakened fundamentals. Analysts are quick to remind that the FY09 GDP growth has been steadily cut down from 9% to around 7.5%. A near double digit inflation and an ever-widening credit deficit, thanks to surging oil prices, are in a way de-valuing Indian markets, they say. It should be remembered that a further de-rating may come at a time when the market has fallen nearly 29% from record levels. As per Bloomberg, one-year forward PE of the Sensex is pegged at 16.9 times.

 Valuations, for sure, are on the higher side when you compare India with emerging markets. At 17X, India is a good investment destination for a longer term. However, if you consider a shorter term say one year or so there are several limiting factors that does not support such valuations, said Kotak Securities vice-president, research, Ketan Karani.

Inflation, impact of crude prices, growth slowdown, high interest rate regime, unstable rupee, political instabilities et al pose greater challenges for India vis-a-vis other emerging markets. India is among the countries that will be badly impacted by rising crude prices.

Setting aside long-term strategies, foreign investors are now only looking for short-term opportunities. The risk appetite of these investors are also on the lower side. If the Indian market doesnt re-rate a bit more, they would sell-off and move on to favourable markets like Russia or Brazil, Mr Karani added. In a recent interview to ET , JP Morgans Asian equity strategist Adrian Mowat had set a target of 9,900 for the Sensex. Mr Mowat is of the opinion that India is relatively expensive when compared with other emerging markets.

FIIs are finding Indian markets relatively less attractive due to the run-up in the markets and high PE coupled with low yield is the reason for being less attractive, says Mowat. Indian equities are not expensive relative to cash and bonds, Mr Mowat opined.

Most of the old-time and experienced foreign investors have been underweight or at best neutral about Indian market for quite some time now.

India is trading at a higher premium than other emerging markets. But from what we see, there are not many markets that can guarantee growth as India does, said DSP Merrill Lynch managing director Andrew Holland.

According to Mr Holland, corporate earnings would be a bit of a concern in the coming quarters as companies will face lot of margin pressure as a result of rising input costs. There is talk of a de-growth among analyst circles. Ill be happy even GDP drops to 7.5% annually, Mr Holland added.

Home | About Us | Terms and Conditions | Contact Us
Copyright 2018 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Binarysoft Technologies - Our Team

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions