High valuation makes India equities less attractive
High valuations have impacted global investors' interest in the Indian stock markets even as the country's economy maintains healthy growth rate, a top official of an international advisory firm said on Thursday.
Morningstar Investment Adviser's Director and Portfolio Specialist Dhaval Kapadia told IANS: "We think valuations are still high, though currently overall growth prospects are good. So Indian equities are slightly underweight.
"Within Indian equities, small and mid-caps are more over-valued than large caps. There have been some corrections in the small and mid-caps over the last two years but they still are high-valued."
Kapadia added that India equities, due to these valuations, look less appealing to the investors though globally also many developed equity markets like US too have high valuations.
About volatility of the Indian equity market, he said: "India has always had a volatile equity market... usually emerging markets are more volatile than developed ones."
Assessments by several analysts say that Mexico is the most attractive emerging market for investors on the indices of growth, yields and equity valuations. India is the worst.
India is the least attractive developing nation for investors due to its relatively expensive stocks, bonds and currency. The NSE stock market index is expected show high volatility next month when the results of the general election are out.
India's ten year bond yields rule at 7.39 per cent and rupee has weakened beyond 70 against the dollar and may slide further.
Kapadia does not see the current oil price surge triggering any upheaval in the Indian market.
"Rising oil prices are not good for India. But the oil prices may not move up towards $100 per barrel. Currently it seems many parallel developments like US speaking of taking care of oil supplies of large oil importing countries like India, Japan and other countries... assuring to increase oil supply... so the situation is not so panicky on oil," he said.
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