Sebi Chief: Sebi Chief Justifies Indian Markets’ High Multiples | Mumbai News

Apr2,2024


Mumbai: SEBI chief Madhabi Puri Buch said on Tuesday that high price-to-earnings multiple In Indian market reflect global investors' Optimism and confidence, arguing that the valuation was a manifestation of the economy's momentum.
The regulatory chief's comments follow his comments in March that there were “pockets of foam” in some market segments. Small-cap stocks improved on their statements on valuations and signs of manipulation in some segments last month.

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At the end of January, India overtook Hong Kong to emerge as the fourth largest stock exchange by value of shares. There have been some comments on the high valuation of Indian stocks. A high P/E ratio may indicate that a stock's price relative to earnings is high and is overvalued. Conversely, a low P/E may indicate that the stock is priced low compared to earnings.
“Why is it that our markets are commanding… It has a price-to-earnings multiple, which is not only higher than the average of world indices but also higher when compared with 22.2 for various countries? Yes, some people say that we are an expensive market, but still why are investments coming in?” Buch said at CII's 17th Annual Corporate Governance Summit. He said it is “a reflection of the optimism and confidence the world has in India today that we are capturing such multiples in our markets”.
The market regulator said direct and indirect tax collections and energy consumption data indicate the pace of the economy. He said GST collections – which started at an average of Rs 1 lakh crore per month – have increased to about Rs 1.7 lakh crore today and this growth is pleasing for global investors. According to Busch, these growth numbers have rippled through the markets and resulted in a “hockey-stick effect.”
“If you see that the market cap has grown from Rs 74 lakh crore to now one times GDP – the growth in 10 years has been phenomenal. India's weight in the emerging markets index has increased from 6.6 to 16.6,'' he said.

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