Indian Equity Valuations Normalise As Global Markets Continue To Trade At Premiums

Valuations of India’s benchmark equity indices have moderated to long-term average levels, even as several major global equity markets continue to trade at elevated valuations, according to data analysed by Moneycontrol.

India’s benchmark Sensex and Nifty indices are currently trading at one-year forward price-to-earnings (PE) multiples of 20.5 times and 20.1 times, respectively. According to Moneycontrol, data shows that these levels are mostly in line with their 10-year average valuations.

In the broader market, the BSE MidCap 150 index is trading at around 28 times one-year forward PE, compared with its long-term average of 27.3 times. The BSE SmallCap 250 index remains relatively expensive, trading at approximately 23.2 times forward PE, versus its historical average of 21 times, despite a recent correction, according to Moneycontrol.

Global Benchmarks Continue To Trade Above Historical Averages

Global equity markets continue to trade above their long-term valuation averages. Japan’s Nikkei index is trading at 23.45 times one-year forward PE, compared with its 10-year average of 18.71 times, according to Moneycontrol.

In the U.S., the S&P 500 is trading at 21.63 times forward PE versus a long-term average of 19.25 times, while the Dow Jones Industrial Average is trading at 21.6 times compared with its historical average of 18.3 times, as per the same data.

In Asia, China’s Shanghai Composite is trading at around 14 times forward PE, higher than its long-term average of 11.7 times. Hong Kong’s Hang Seng index is trading at 11.58 times forward PE, compared with its historical average of 10.5 times.

The moderation in Indian benchmark valuations follows a phase during which indices traded consistently above historical levels amid sustained domestic inflows and subdued earnings growth. Corporate earnings growth has remained modest, with aggregate earnings growth reported in the range of 4–5%, as per Moneycontrol.

Foreign institutional investors sold about $4 billion worth of Indian equities in January, before turning marginal buyers in recent sessions, according to exchange data cited by Moneycontrol. Investors are still paying attention to earnings trends and global events, such as news about the India–U.S. trade agreement. Market movements are still following valuation levels and capital flows.