Indian stock valuations trading above average, but no overheating yet: Motilal Oswal Financial Services
Indian equities are currently trading at valuations exceeding their long-term averages, with the Nifty's PE ratio at 21.7 times. While not considered overheated, the market capitalization-to-GDP ratio is elevated at 127% for FY26.
By ET Bureau |
ETMarkets.com
The Nifty’s PE ratio in September 2024, when the indices hit their peaks, was at 23-24 times.
Valuations of Indian equities are trading above their long-term averages, indicating stocks are far from cheap at current levels. The Nifty is trading at an estimated Price to Earnings (PE) ratio of 21.7 times, above its averages for five, ten and fifteen years, according to Motilal Oswal Financial Services.
The price-to-book multiple for the Nifty stands at 3 times, compared to a decade average of 2.7 times, it said. “While valuations have crept above long-term averages, we do not consider it to be in the overheated zone,” said the brokerage’s note.
The Nifty’s PE ratio in September 2024, when the indices hit their peaks, was at 23-24 times. The market capitalisation-to-GDP ratio, a broad indicator of overall market valuations, is estimated at 127% for FY26, above the historical average of 87%.
The measure, also known as the Buffett indicator after Warren Buffett, is down from a peak of 146% in September. The PE ratios of mid-cap and smallcap indices show their valuations are at a premium to the large-cap stocks. Motilal Oswal’s head of institutional research Gautam Duggad said the firm is raising allocation to midcaps, citing superior growth. The brokerage prefers a blend of large- and mid-caps.
