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Indian equities look stable, but valuations are stretched by slower earnings
The piece links the market’s resilience to strong SIP inflows and warns that premium valuations now lack earnings support as global rate conditions remain tight.
LiveMint Markets argues that India’s equity market looks stable largely because strong SIP inflows are providing a domestic liquidity floor. The outlet says this liquidity can mask a divergence between moderating corporate earnings and higher valuations, leaving investors with less margin of safety.
The analysis frames the backdrop as a global cost of capital problem. It notes the US 10-year Treasury yield hovering near 4.64%, says near-term monetary easing is priced out, and highlights the Fed’s hawkish stance as keeping the risk-free benchmark elevated.
It also points to currency pressure for foreign investors, citing steady depreciation of the Indian rupee that it estimates creates a structural 2% to 3% annual drag on dollar-denominated internal rates of return. The outlet presents this as a “silent tax” that can deter cross-border capital from paying inflated local multiples.
LiveMint Markets compares valuations across regions, saying several global companies trade at lower multiples than Indian mid-cap medians while still producing higher free cash flow yields. It cites examples including broad Indian mid-cap trading around 44.3 times trailing P/E versus domestic capital goods leaders crossing 55 times to 80 times trailing earnings, and discusses higher global FCF generation supported by gross margins above 50%.