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India a cheap emerging market relative to earnings growth

This article was posted on Sep 3, 2014 and is filed under Market News

India has one of the lowest valuations relative to its growth — the third-smallest among 13 emerging markets.

With both its price-earnings multiple and growth in the mid-teens, its PEG (price-earnings to growth) ratio of 1 is higher than only Taiwan (0.9) and Korea (0.7). Those more expensive than it include Brazil (1.3), Singapore (1.9) and Malaysia (2.6).

The analysis is based on data compiled by JPMorgan. “…India valuations remain meaningfully expensive as compared to peer group in EM (emerging markets), particularly in the BRICS group, in relative terms… But the premium could be justified against the backdrop of higher earnings growth forecast,” said its August 27 India Equity Strategy report note, authored by Bharat Iyer, Bijay Kumar and Adrian Mowat.

Companies in India’s benchmark indices are estimated to have earnings growth of 10-11 per cent for the current financial year, according to Bloomberg estimates. This is expected to be in excess of 19 per cent for the next financial year.

Companies are likely to show a more robust set of numbers in the days ahead, market experts agree. Rakesh Arora, managing director & head of research at Macquarie Capital Securities, said India could not be described as overvalued.

For more visit: Business Standard

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