How Overvalued is India's Stock Market? Analysts Are Most Bearish On These 3 Indian Equities 1

Analysts ratings

Analysts believe valuations in India’s (INDA) equity markets are currently stretched but that India is still the best bet among emerging markets. Jeff Gundlach, CEO and Founder of DoubleLine Capital recently called India his “favorite stock market”. However, Rajiv Jain, Fund manager at Goldman Sachs GQG Partners International Opportunities Fund believes Indian markets are overvalued and unjustified.

“India is the single most expensive market globally. It’s more expensive than the US. The currency is also overvalued, and earnings estimates have been declining the most among any market this year.”

“Top-down, from a political perspective, it looks good, but I think from a bottom-up, company-wise scenario, it’s not good at all in terms of where the general banking system is, where credit growth is, where the yield curve is.” He later added, “People are usually either too pessimistic or too optimistic on India.”
Analyst estimates tend to drive short-term movements of stocks. Changes in ratings and estimates guide investors towards what markets are expecting from a particular company.

Analysts are most bullish on Federal Bank (FEDERALBNK), ICICI Bank (IBN) and Indian Oil (IOC) as these stocks have received more than 80% buy ratings, and few sell ratings.

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Analysts are most bearish on Container Corp (CONCOR), Divi’s Lab (DIVISLAB) and Rural Electrification (RECLTD) as these stocks have received the highest number of sell ratings. Container Corp has received just 16 buy ratings, 6 hold ratings, and 10 sell ratings while Divi’s Labs has received 5 buy ratings, 4 sell ratings, and 9 hold ratings. Rural Electrification has received 12 buy ratings, 4 hold ratings and 6 sell ratings. These stocks have a return potential of -11%, 0.2% and -21% respectively over the next 12 months.

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