Indian Indices among most expensive in the worldIn its monthly bulletin, SEBI has given the Price-to-Earnings Ratios of different world indices. PE is a measure of valuation – a higher ratio denotes a more expensive market and vice versa. The figures show that the Sensex and Nifty PEs of 20.6 and 19.8 are among the most expensive, second only to the US NASDAQ at 22.2.

Other developing markets have much lower ratios. Brazil is at 11.5, China at 12.2, Indonesia at 15.4 and Russia at just 5.9. By itself a PE ratio is not a buy or sell signal, its level can be justified if earnings grow rapidly. However, this is exactly what a high ratio for India is indicating – a high level of investor optimism about earnings. If this does not turn out to be the case, investors may be in for a major disappointment.

Country PE Ratio
Australia 16.7
France 14.5
Germany 12.9
HongKong 11.8
Singapore 13.6
UK 14
USA (DJIA) 16.1
USA NASDAQ 22.5
India (BSE) 20.6
India (NSE) 19.8
Argentina 12.3
Brazil 11.5
Chile 16.2
China 12.2
Colombia 13.8
Egypt 12.2
Hungary 10
Indonesia 15.4
Malaysia 15.8
Mexico 15.6
Pakistan 9.4
Russia 5.9
South Africa 14.5
Taiwan 13.4
Thailand 15.7
Turkey 7

Source: SEBI Monthly Bulletin. Figures for May 2018

The Indian stock market in terms of market cap is also now a large one, globally. At $2.2 trillion, it is only marginally smaller than Germany ($2.3 trillion) and France ($2.5 trillion). The UK market sits higher at $3.7 trillion, Japan at $6.3 trillion and China at $7.3 trillion. All of these markets are dwarfed by the US market which has a market capitalisation of $30.3 trillion.

Author
Neil Borate

Neil Borate is Deputy Editor, RupeeIQ. He can be contacted at neil@rupeeiq.com.