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Comments on Mehra: Indian Equity Markets Surjit S. Bhalla* July 15, 2009 Brookings-NCAER IPF 2009, New Delhi, India *O[x]us Research & Investments, New Delhi Email: ssbhalla@gmail.com . Determinants of growth, industrial growth and corporate valuations
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Comments on Mehra: Indian Equity Markets Surjit S. Bhalla* July 15, 2009 Brookings-NCAER IPF 2009, New Delhi, India *O[x]us Research & Investments, New Delhi Email: ssbhalla@gmail.com
Determinants of growth, industrial growth and corporate valuations • Valuation of stock market, overvaluation, over and under • Important role of buyers (middle class FIIs) ; • Important role of interest rates • Comparison with other countries Main Points
Figures in parentheseis denote country wise 10 year growth (moving average) in manufacturing and industry respectively Countries Where Industrial growth has averaged over 7% for a Decade – India Not One (as yet)
. Consequence of middle class: low world inflation
. Indian Equity Markets • Indian capital markets • More diversified with 21 sectors • Lower concentration of market capitalization in the top 10/20/30 companies (similar to the US) • Diversification vs. commodity play • Russia (69%) and Brazil (48%) - are mostly driven by commodity sectors versus India ( 31%) • 41 of the top 100 performing companies in the world were in India and 32 of those were small-caps (Russell Investments, 2007)
. Sensex earnings have kept pace with price growth: 1990-2008
. Sensex P/E Ratio 1995-2008: Overvalued?