Is India’s market overpriced? Here’s what Aswath Damodaran thinks

Renowned valuation expert Aswath Damodaran has raised concerns over India's soaring market valuations, calling it the most expensive market in the world. In his latest blog post, he argues that the current pricing metrics are unsustainable and pose significant risks to investors.

“The most expensive market in the world is India, and no amount of handwaving about the India story can justify paying 31 times earnings, 3 times revenue, and 20 times EBITDA, in the aggregate, for Indian companies,” Damodaran wrote.

India’s High Valuations vs. Global Markets

India’s stock market has been drawing substantial attention due to its rapid economic growth and investor optimism. However, Damodaran warns that while the country is often hailed as a high-growth economy, its valuation multiples far exceed those of most other global markets.

In comparison, some of the world’s cheapest markets—such as Latin America and Eastern Europe—come with their own risks, including political instability and lower economic growth. Meanwhile, Japan, despite having relatively lower valuations, faces long-term challenges due to an aging population.

Global Valuation Trends

Damodaran highlights that several markets trade at significantly lower price-to-earnings (P/E) ratios than India. Africa has some of the lowest multiples, while Latin America presents a mixed picture—Brazil and Colombia rank among the cheapest markets, whereas Argentina is among the most expensive.

He also points out that certain regions, such as the Middle East, may appear costly due to their market composition, particularly the dominance of financial services firms that report little to no revenues. On the other hand, Japan and South Korea seem undervalued based on enterprise value-to-sales metrics, though they face their own economic headwinds.

Key Takeaway for Investors

Damodaran’s analysis underscores the importance of carefully evaluating market conditions before investing. While India remains an attractive destination for growth-oriented investors, its current valuations may not be sustainable in the long run. As global markets continue to shift, understanding the risks associated with different regions will be crucial for making informed investment decisions.