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Comments on Mehra: Indian Equity Markets Surjit S. Bhalla* July 15, 2009 Brookings-NCAER IPF 2009, New Delhi, India *O[

Comments on Mehra: Indian Equity Markets Surjit S. Bhalla* July 15, 2009 Brookings-NCAER IPF 2009, New Delhi, India *O[x]us Research & Investments, New Delhi Email: ssbhalla@gmail.com . Determinants of growth, industrial growth and corporate valuations

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Comments on Mehra: Indian Equity Markets Surjit S. Bhalla* July 15, 2009 Brookings-NCAER IPF 2009, New Delhi, India *O[

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  1. Comments on Mehra: Indian Equity Markets Surjit S. Bhalla* July 15, 2009 Brookings-NCAER IPF 2009, New Delhi, India *O[x]us Research & Investments, New Delhi Email: ssbhalla@gmail.com

  2. Determinants of growth, industrial growth and corporate valuations • Valuation of stock market, overvaluation, over and under • Important role of buyers (middle class FIIs) ; • Important role of interest rates • Comparison with other countries Main Points

  3. Indian growth performance in three steps

  4. India China: Comparable growth in Capital Stock

  5. Figures in parentheseis denote country wise 10 year growth (moving average) in manufacturing and industry respectively Countries Where Industrial growth has averaged over 7% for a Decade – India Not One (as yet)

  6. . Consequence of middle class: low world inflation

  7. Real interest rates and economic growth

  8. . Indian Equity Markets • Indian capital markets • More diversified with 21 sectors • Lower concentration of market capitalization in the top 10/20/30 companies (similar to the US) • Diversification vs. commodity play • Russia (69%) and Brazil (48%) - are mostly driven by commodity sectors versus India ( 31%) • 41 of the top 100 performing companies in the world were in India and 32 of those were small-caps (Russell Investments, 2007)

  9. . Sensex earnings have kept pace with price growth: 1990-2008

  10. . Sensex P/E Ratio 1995-2008: Overvalued?

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