Is the Indian Equity Market Still Overvalued?

Whether the Indian equity market is undervalued or overvalued obviously depends upon the criteria being used. I’ve seen market pundits use a variety of ratios and metrics to justify their positions. Despite the protestations of various “market wizards,” there is no holy grail of valuation. I personally use a variety of valuation indicators to assess both the market and individual equities. However, there are certain metrics and ratios that have proven over time to be highly accurate in forecasting future returns. One of these measures, the CAPE (Cyclically Adjusted Price-to-Earnings) ratio has a strong relationship to subsequent 10-year returns. The validity of the CAPE ratio has not only been proven in the US but also across international markets.

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