By all traditional valuation measures the Indian equity markets are now looking expensive. The reasons are two-fold.
First, there’s a flood of liquidity that’s inflating asset prices across the world. Global discount rates are now at unprecedented levels – a dozen or so countries have negative short term rates. A few of these are fast approaching negative long term rates (imagine buying a bond and having to pay interest for the next few years!). Surely, some of this liquidity is finding its way into the Indian markets. Foreign Institutions currently hold 50% of the entire free float for the 200 biggest Indian stocks – an all time record. We are concerned.
Notes & Letters
A collection of our thoughts, views, and excerpts from our investor letters.