Valuation of India's premium to EMs and world market shrinks, shows data

Gap narrows by 25% since October; better growth prospects underpin valuations

Domestic equity valuation premiums to both the emerging and world markets have shrunk by a fourth since October. However, Indian markets remain expensive vis-à-vis most global equities, which, observe experts, is justified, given India’s better growth prospects.

Currently, the Morgan Stanley Capital International (MSCI) India Index commands a 12-month forward price-to-earnings (P/E) multiple of 21.6x.

By comparison, the MSCI Emerging Markets (EM) and the MSCI World indices trade at 11.3x and 16x, respectively, according to Bloomberg data.

In October, India’s P/E was 2.2x that of MSCI EM and 42 per cent higher than MSCI World.

Back then, the MSCI EM