FLIN - INDA: A Steeper But Not Unreasonable Price For India's Growth Story

2024-02-25 03:04:41 ET

Summary

• At first glance, Indian stocks are priced to perfection.
• But there are more than a few mitigating factors.
• The largest and most liquid US-listed ETF, INDA, remains a great choice for passive Indian exposure.

Along with Japan, India has been the hottest Asian market over the last year. One year in, though, analysts are starting to question the sustainability of this rally. Per Kotak Bank : “Stocks are overvalued in general; some less, some more, some bizarre.” I’d disagree with the skeptics, particularly for the Nifty/MSCI large caps, where earnings contributions, rather than re-rated valuations, were the overarching driver last year (see graphic below). Reporting for Q3 FY24 has similarly been solid, with momentum in cyclicals and capital goods names, many of which will further benefit from a BJP government-led multi-year capex push, supporting high-teens % YoY earnings growth....

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