India’s stock market has seen a rise in its valuation, measured by a metric called PE ratio. This could be a cause for concern, as a high PE ratio suggests stocks are expensive. However, Jain argues this might not be a bad sign for India.
Two key points support this argument. Firstly, similar increases in PE ratio are happening in other major markets like the US and Europe. This suggests it’s a global trend, not specific to India. Secondly, unlike other markets where the financial sector is driving the valuation increase, India’s financial sector valuations have actually gone down. This means other sectors in India are experiencing strong growth, potentially justifying the overall market rise.
Jain believes India’s companies are expected to have even stronger earnings growth in the future compared to other markets. This promising outlook strengthens the case that India’s current valuation might be reasonable.
First Published: Jul 17 2024 | 12:23 PM IST
