Securities and Exchange Board of India (SEBI) Chairman Madhavi Puri Buch said on Tuesday that India attracts investments despite its high price-to-earnings (PE) ratio compared to other countries. He said this was thanks to the trust and confidence of investors.
“Yes, at 22.2x (PE multiple), some say the market is expensive, but still why are the investments coming in? This means that India is demanding this kind of multiple in the market. , is a reflection of the optimism, trust and belief in India in the world today,” Buch said at the Corporate Governance Summit organized by CII.
P/E ratio is the ratio between a stock’s price and its earnings per share (EPS). It is an evaluation index that shows whether a stock or index is high or low.
Buch said the PE multiple in the Indian stock market is even higher than the average of global indices. The P/E ratio of the Indian market is higher than most major countries except Japan. As of April 2, Japan’s one-year forward P/E ratio is 23.2 times, but in the stock market, it is 10.86 times in China, 18.4 times in Taiwan, 14.28 times in France, 13.6 times in Germany, 11.36 times in South Korea, and 10.64 times in Singapore. said the analyst.
There are also concerns about the valuation of Indian stocks, especially small and mid-cap stocks. Nilesh Shah, managing director of Kotak Mahindra Asset Management Company, said in a recent interview with The Indian Express that the current market is similar to the 2008 subprime crisis and even mid-2022. He said that it was not that cheap. This is a pretty good value market, with large-cap, mid-cap, and small-cap stocks trading slightly above their historical long-term averages, but this is justified as returns are also above average.
“Our fundamental growth story is going very well. Now, is there any surplus in the market? Absolutely. It’s a little bit lower, small caps are the lowest and micro caps are even lower. We are now seeing a reversal trend in terms of valuations,” Shah said.
In the last fiscal, the Sensex rose 25%, while the Nifty rose 29%. Foreign portfolio investors (FPIs) purchased domestic equities worth Rs 2,080 crore on a net basis in FY24.
The SEBI Chairman further said that one of the key factors driving the resilience of the domestic market is the participation of retail investors, directly or indirectly through mutual funds. In the past 10 years, unique investors have grown from 1 billion to 4.4 billion, she said. Assets under management also increased from Rs 800,000 crore to Rs 5.5 million.
The amount raised through systematic investment plans (SIPs) hit a record high of Rs 19,186.58 crore in February 2024, as against Rs 18,838.33 crore in the previous month, according to the latest data from Association of Mutual Funds of India. did.
In the last 12 months, the industry raised Rs 10.5 million from the capital market.
The Trading Plus One (T+1) trade settlement cycle improved the defect rate of settlements, as measured by the delivery-to-payment (DVP) ratio, after the cycle was introduced. DVP is a securities market settlement method.
“Before we moved to T+1 (trade settlement cycle), the defect rate was 0.7 to 0 to 8 percent. After T+1, it was halved to 0.3 to 0.4 percent. , the whole process becomes much more optimal and efficient,” she said.
The T+1 cycle for the settlement of funds and securities was fully implemented in January 2023. In a T+1 cycle, securities and funds are settled by the day after the trade. Last month, SEBI introduced the beta version of his T+0 settlement cycle for options, i.e. same-day settlement.
