Losing sheen: Equity valuations fall amid spike in US bond yields

Price-to-earnings expand when yields soften and the valuations come down when yields harden as risk-reward dynamics change

As investors flee risky assets, equity valuations have come off sharply this year. The MSCI Emerging Market (EM) currently trades at less than 11 times its projected one-year forward earnings. Valuations for the EM index have come down by 14 per cent this year. Similarly, the valuation for MSCI ACWI (All Country World Index) is down 12 per cent to 14.3 times.  In comparison, the de-rating for Indian equities has been relatively less. 

The MSCI India index currently trades at 17.6 times its one-year forward earnings, down around six per cent from where it was during the start of the year.