India may underperform, says Credit Suisse

MUMBAI: India along with Philippines, Indonesia and Malaysia are likely to continue to underperform in an Asia and emerging market context as these four countries are overvalued in terms of price to book vs return on equity valuations, said Credit Suisse.

For India, every time the premium of price to book vs return on equity rises to above 50 per cent, it has tended to underperform and MSCI India has underperformed so far this year by 5.8 per cent, according to the brokerage.

India’s implied ROE is 17.7 per cent versus the current ROE of 12.1 per cent according to Credit Suisse estimates.

Currently Credit Suisse overweight on Korea, China, Singapore, Hong Kong and Taiwan.

“While growth markets like India and Indonesia do deserve to trade at a premium, we question the size of the current premium. We have highlighted that in the past India has tended to underperform when the premium rises to above 50 per cent” Credit Suisse said in a note.