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Sunday, August 28, 2011

How attractive Indian markets are?

Market capitalization to GDP ratio gives pretty clear idea about the attractiveness of any capital market.
Last time when we calculated this ratio for the Indian market it was 172 %; having seen fall in the broader market it was tempting to calculate this ratio again.
On 26/08/2011, combined Market Capitalization of NSE and BSE was Rs. 1,14,94,548 crore.
When we divide aforesaid M-cap by India’s GDP which is assumed to be Rs. 73.6 trillion Rs. for FY 11; we get 156% as the value of this ratio, which is at 9.3 % discount to the previous value.
This means, Indian markets still are not that attractive.
Generally M-Cap bellow 130% of the GDP is considered viable for investment by value investors.
It is intriguing that despite the fall in broader indices, many stocks have not fallen proportionally and few have given good returns.


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