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Strategies & Market Trends : India Stocks -- Ignore unavailable to you. Want to Upgrade?

To: Sam Citron who wrote (409)	3/12/2004 3:27:58 PM
From: Sam Citron	Respond to of 2517

India beats the emerging market peers in PE, m-cap ratios ARSHDEEP SEHGAL TIMES NEWS NETWORK 3.12.04 NEW DELHI If you thought the Indian stock markets were cheap at the levels they are now, think again. Indian market valuations are currently higher than what some emerging markets are attracting. On parameters such as price-earning (PE) multiples and market capitalisation ratio to GDP, Indian stock markets have marched ahead of a large number of emerging markets. For instance, while Indian markets are quoting a PE multiple of 18, Russian and Korean markets, which were among the best-performing markets in ’02, are available at a PE multiple of 11.1 and 15.7 respectively. A PE multiple is the relationship between a company’s earnings and its share price, calculated by dividing the share price of a stock by its earnings per share for a 12-month period. Analysts argue that with India being valued at a higher PE multiple than some other emerging markets, investors could perceive investing in other emerging countries cheaper than investing into India . Amongst other emerging markets, only four markets are quoting a higher PE than India . Israel is on top with a PE ratio of 34.3, followed by Chile with 32.5. In the Asian region, the Taiwan market attracts the highest PE multiple of 28.8. China and Malaysia are a shade above India , with PE multiples of 18.8 and 18.7 respectively. If Indian valuations are compared with other emerging markets on price to cash-earning ratio, only Israel is valued higher than India . While India has a ratio of 13.8, Israel has a higher ratio of 20.4. The price to cash-earnings ratio is a measure of the market’s expectation regarding a firm’s future financial health. It is calculated by dividing price per share by cash flow per share. This provides a relative value, similar to the PE ratio. A fund manager says, “Indian corporates are giving one of the best returns on equity capital in the emerging markets. This is one reason that despite higher multiples, foreign fund flows in the Indian markets are higher.” On other important parameters such as market capitalisation to GDP ratio, the Indian market has risen above an average of 28 emerging markets. The market cap of the Indian market is equivalent to 50% of the country’s GDP. But given the fact that some large companies in India are still unlisted, this ratio could have been even higher up. This list is topped by South Africa with a market cap to GDP ratio of 176. A majority of the countries that have higher market cap relative to GDP are smaller markets such as Brazil , Chile , Malaysia and Jordan . On the other hand, the Chinese market cap relative to GDP, stands at 38%, while Russia ’s stands at 43%. economictimes.indiatimes.com