Liquidity Rush Drowns Valuation Worries
Whenever the talk turns to market valuations being ‘expensive’, my mind reels back to this BloombergGadfly article, published back in October 2016.
My take from this article then - it was very difficult for markets to correct when investors were seated on dollops of cash. In October 2016, BlackRock had estimated that the number was $50 trillion! That was a lot of money. And the taps haven’t stopped, for India either, as the local flows have been very strong, as the mutual fund data shows.
Every single global voice BloombergQuint spoke to over the last few days has expressed a preference for emerging markets like India. Little surprise then, that Indian markets are continuing their run, albeit in line with global markets. And little surprise that, post the Uttar Pradesh elections, the wrinkles on the peel for the Indian markets, if any, are easing off.
India has performed exceptionally well year-to-date, and even better in dollar terms.
For local investors too, there has been enough to cheer, as Indian stocks have done better than most large emerging markets, as shown in the comparative below.
Yes, the valuations, at over 17.4 times price-to-earnings one-year forward are expensive. But who is to argue against the prices when the ticker refuses to buckle down? As they say in local Gujarati brokerages... Bhaav Bhagwaan chhe (market is always right).
Niraj Shah is Markets Editor at BloombergQuint.