Markets Aren't Overheated at Current Levels

India is the most richly valued market among developed and emerging economies, but as long as its growth continues to outpace peers and macroeconomic stability holds, it will keep drawing a steady stream of foreign inflows, says Rahul Arora, chief executive officer for institutional equities at Nirmal Bang, in a telephonic conversation with Puneet Wadhwa. Edited excerpts:

- 

Have markets moved past the Trump tariff threat trade and into TACO (Trump Always Chickens Out) territory?

In our view, tariffs for most countries are likely to settle in the 10-20 per cent range, and markets have largely priced that in. Where negotiations have not made much headway, threats of steeper tariffs remain, but these appear more like negotiating tactics. We don't believe tariffs will materially stoke inflation, especially with China still exporting deflation.

Do markets lack a clear catalyst to move higher in the short-to-medium term?

Markets have already scaled a wall of worry—from tariff tensions and border skirmishes to unrest in West Asia. Crude oil prices have been well-behaved despite these geopolitical risks. So, the worst may be behind us. But any further upmove will now have to come from earnings.

How do valuations stack up right now?