Our lofty equity valuations are pure Bollywood

EVEN TO SEASONED investment professionals, India's lofty equity valuations are a head-scratcher.

- Andy Mukherjee Bloomberg

How's a sell-side researcher to explain to a foreign institution that the country's cement makers are more than twice as expensive as their peers in every other major market? Building materials are just one example, though that's what analyst Sanjeev Prasad and his team at Kotak Institutional Equities picked to raise some provocative questions in a recent investor note, titled What the cement sector tells us about our industry.

They discussed the possible reasons for what they termed as "absolutely ridiculous" multiples. Those looking for short-term trading opportunities may not care about rational analysis from brokers as long as the prognosis is cheery enough to draw in other punters. And sure enough, as Prasad and his colleagues show, deep downgrades to upbeat earnings forecasts for the sector have been routine over the past decade. And this is when as a single-product, domestic industry, cement is relatively easy to analyse.