With bullish market sentiments and addition of new equities through the primary market, India’s market capitalisation increased by $718 billion in 2021 so far to a record $3.28 trillion.
ET Intelligence Group: The valuation premium of Indian equities compared with emerging market counterparts has risen to a decade high. According to Bloomberg data, the MSCI India index, a measure used by global fund managers to gauge the performance of Indian equities denominated in dollar terms, trades at 80% premium to the MSCI EM index, which represents the emerging market (EM) equities. It is much higher than the long-term average premium of 44%.
Indian equities delivered an annual return of 12% compared with the 6% return of the EM index in the past five years. The valuation premium amplified in 2021 due to a sharp divergence between the performance of Indian equities and their EM counterparts. The former gained 20% while the latter lost 5% on year-to-date basis.
In a report, Credit Suisse said that majority of sectors have undergone earnings upgrades year-to-date. This and a roll forward impact in the derivatives segment helped Indian equities to outperform. “Several sectors are yet to see significant revisions to FY22/FY23 EPS, that can drive performance,” the report added.
Valuation premium of Indian equities over developed markets rose to 18.2% compared with a 10-year average of 7%. The premium crossed 18% in just 9% of the trading sessions over the past 10 years.
With bullish market sentiments and addition of new equities through the primary market, India’s market capitalisation increased by $718 billion in 2021 so far to a record $3.28 trillion.
This raised the country’s incremental addition to the global market-cap to 4.6% from the long-term increase of 2.4%. India’s market-cap is now a whisker away from the $3.3 trillion of France, which is the sixth- largest among the top global markets.
