Valuations limit upsides in near term: Mkt gurus

The equity valuation premium for the Indian stock markets has "limited room to expand" in the short to medium term despite the country's economy on a structurally sound path, said market analysts at the Business Standard BFSI Insight Summit on Thursday.

- PUNEET WADHWA & NIKITA VASHISHT

Speaking at a panel discussion in Mumbai, they concurred that a person's investment horizon was key to earning returns from the market.

The price-to-earnings (P/E) multiple of Indian markets is 20-30 per cent higher than their long-term averages, resulting in expansion of the premium of Indian markets over other emerging markets, said Prashant Jain, chief investment officer at 3P Investment Managers.

"To a large extent, this is justifiable as India's prospects appear better as compared to the last 10 years. A lot of improvement has taken place in India in terms of reforms amid lower inflation. However, there is limited room for P/E multiples to move up and return expectations going ahead have to be moderate," Jain cautioned.

No other equity market offers the rate of growth as seen in India, Vikas Khemani, founder, Carnelian Asset Management, said, asserting that this will see investors chase Indian equities, and eventually lead to the likely expansion of valuation multiples over time.

P/E ratio in isolation cannot be the sole indicator of an expensive market, said Sunil Singhania, founder, Abakkus Asset Manager.

Noting that as value conscious investors, it is an important factor to consider, he emphasized that investors should be able to digest market volatility to make money over a long period of time.