Indian stocks among the world's costliest

Last Updated: Fri, Dec 07, 2012 07:40 hrs

pIndia is the second most expensive stock market worldwide after Japan as foreign institutional investors FIIs pumped in over 20 billion into the nation&rsquos equities the second highest inflow since 1993 The Sensex is trading at a price to earnings PE ratio of 1577 times its 2012 estimated earnings per share making it among the most valued equity benchmarks in emerging marketsppIndia is the costliest market also among BRICS Brazil Russia India China and South Africa nations and is trading at a substantial premium to China Even on the basis of 2013-14 estimated earnings which capture the growth estimates of companies compromising the respective indices the Sensex remains the second most costly market after JapanppUnabated FII inflows have aided the rise in India&rsquos stock valuations The Sensex has gained 26 per cent in calendar year 2012 from 1545492 to 194868 while its gain in the current financial year is 1197 per cent Foreign investment banks such as Goldman Sachs Morgan Stanley and HSBC are betting on further upsides in the nation&rsquos benchmark indices as FII inflows might continue amid the government&rsquos attempts to revive investor sentiment with a slew of pro-business measures including foreign direct investment in multi-brand retail and loose monetary policies adopted by global central banks Morgan Stanley expects the Sensex to rise nearly 26 per cent to 23079 by December 2013 Goldman sees the Nifty scaling to 6600 by December 2013 and HSBC&rsquos head of technical analysis Murray Gunn in a recent interview with Business Standard said the Sensex could touch 25000 by next year The Sensex closed at 1948680 and the Nifty at 593090 on ThursdayppIndian stocks have always traded at a premium to most emerging markets since the last bull run thanks to its superior economic and earnings growth But with earnings outlook turning hazy many analysts do not see much room for further expansion in valuationspp&ldquoIndia&rsquos current valuations reflect an average earnings growth of 8-10 per cent over the next couple of years But here on there is very little space for stocks to re-rate&rdquo said Tirthankar Patnaik director and strategist Religare Capital MarketsppInvestors and analysts believe the government&rsquos recent moves may not be enough to revive the sagging economy On most economic parameters the country is on a weak wicketppAnalysts said Indian markets may look expensive if Sensex valuations are considered but that is not the case with stocks beyond the top 200 Majority of the foreign institutional flows into the nation&rsquos stock market has been into the large-caps and some well-known mid-capspp&ldquoThere is still lot of value in many stocks outside the top 200 stocks that are yet to be tapped But this will not happen unless retail investors return to the market&rdquo said Patnaikp

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