THE STEEP RUN-UP in the last month-and-a-half has pushed up valuations of Indian equities.
After a punishing first half, the Nifty 50 rallied 8.7% in July on hopes that the US Federal Reserve would raise rates at a slower clip, paring the year-to-date decline to 1.3%.
The Nifty50 is now trading at 20.1x the FY23 estimated earnings. The country's market capitalisation-to-GDP ratio based on FY23E GDP is at 102%, comfortably above its long-term average of 79%. The MSCI India index is trading at a 116% premium to the MSCI EM index, above its historical average of 62%, data from brokerage Motilal Oswal shows.
"The Nifty, at 15,200, was a good level to bet on. At 17,400 levels, and with an economic recession in major economies yet to play out, I'm a bit nervous," said Andrew Holland, CEO, Avendus Capital Public Markets Alternate Strategies.
Holland believes that profit forecasts globally are too high and that the 'bad news is good news' trade is based on more of what happened in the recent past rather than what happened during the previous economic recession.
India got the most flows into equities among emerging markets in July, after South Korea, provisional data from the Institute of International Finance shows. China saw the most outflows to the tune of $3.5 billion during the month.
This story is from the August 08, 2022 edition of Financial Express Mumbai.
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This story is from the August 08, 2022 edition of Financial Express Mumbai.
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