India Leads Global Equity Valuation Surge...It will be ahead of any country.

 

A recent analysis highlights a striking divergence in global equity valuations, with India’s NSE500 emerging as the most expensive market in terms of high price-to-earnings (P/E) multiples. According to the data, 47% of Indian stocks trade at valuations above 40x earnings, nearly double the next in line—China’s CSI 300, at 25%. Does this mean we are expensive?  How long have these expensive valuations exist?

India’s equity market has been the epicentre of investor enthusiasm over the past two years, fuelled by robust domestic consumption, accelerating foreign inflows, and optimism around structural reforms. The result: nearly one out of every two NSE500 companies trades at a premium multiple, signalling both strong growth expectations and stretched valuations. Soon, we will witness a huge surge in new demat account openings. SIP numbers will grow exponentially in the coming 2 quarters.

Reasons for low GST, nil income tax up to Rs12lakhs, low interest rates, savings are longer channelised into fixed income products, but into equities. For example, key Statistics on SIP Investors and Growth SIP participation has grown exponentially, with the number of accounts surging from around 5.2 crore in FY22 to over 10 crore by early 2025. Monthly inflows have more than doubled in three years, reflecting sustained retail enthusiasm despite global uncertainties.

On the other side as of September 9, 2025, the total number of demat accounts stands at approximately 18.5 crore (185 million), up from 16 crore at the end of FY24 and a mere 4 crore in FY20. This represents a compound annual growth rate (CAGR) of over 35% in the last five years, fueled by retail investors entering the stock market amid post-pandemic optimism and India's economic rebound (GDP growth >6%)

By comparison, Taiwan (16%), Germany (15%), Indonesia (14%), and the US S&P 500 (14%) show far lower shares of such richly valued companies. Mature markets like the UK, Europe, and Korea hover at around 10%, while Brazil—among the cheapest—has just 1% of its stocks above the 40x threshold. Now a as these markets are not having such an upsurge in expansion of financial market like India and having a GDP growth of 7% India will stand out in the league of valuations when compared to other countries.

Drivers of Valuations in India

• Domestic Liquidity: A surge in retail participation through mutual funds and SIPs has provided steady inflows into equities.
• Economic Momentum: India remains one of the fastest-growing large economies, with GDP growth projected above 6%.
• Sectoral Hotspots: High-growth sectors such as technology services, consumer discretionary, and financials command outsized premiums.
• Global Positioning: With geopolitical realignments, India is seen as a strategic beneficiary of supply-chain diversification away from China.

Global Context: A Valuation Gap

The contrast with developed markets is stark. In the US, despite the S&P 500’s 30% rebound this year, only 14% of stocks trade at such elevated multiples. The Nasdaq Composite, known for its tech-heavy tilt, shows just 9% of its components above 40x. Meanwhile, Europe’s broad SXXP index and the UK’s FTSE100 both stand at 10%.

This underlines how India’s equity exuberance is unique—with investors pricing in not just near-term earnings growth, but also long-term structural opportunity.

Takeaway

India’s equity market stands at the intersection of opportunity and caution. On one hand, the country offers unmatched growth potential among major economies, making it a long-term magnet for capital. On the other hand, the 47% share of NSE500 stocks above 40x earnings reflects a level of optimism that may not be immune to corrections.

For global investors, India’s valuation premium signals that stock selection is critical. Rather than chasing momentum, disciplined exposure to sectors with durable earnings visibility may offer the best balance of risk and reward. Hence, we will find many investors chasing fewer stocks, and thus, the anomaly of valuations and prices will persist more in the coming days, just like in the case of defence stocks.