"With continued downgrades to consensus EPS and weak ROE, India's premium on our P/B vs ROE valuation model has now risen to 64 per cent close to its highest ever," Credit Suisse Research Analysts Sakthi Siva and Kin Nang Chik said in the note.
The brokerage believes overvalued markets could stay overvalued for longer than expected especially if the US-China trade war escalates, but cautioned that India could be the next shoe to drop.
"We believe the current combination close to highest ever premiums versus the region, four consecutive years of downgrades to consensus EPS, current account deficit, rising oil prices further pressuring the current account and fiscal deficits and the fact that foreign investors have yet to capitulate suggest India could be the next shoe to drop," the report noted.
The BSE benchmark Sensex is hovering around 35,300 points. It has gained 3.65 per cent so far this year.
(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)