India is the most expensive market in the region for 2007 after considering various metrics such as price-to-earnings ratio,
book value, dividend yield etc.
NEW DELHI: India is the the most expensive equity market in Asia-Pacific region for 2007, excluding Japan, though the country can give the second-highest returns to investors after Indonesia, says a study by the global brokerage firm Citigroup.
According to a new report from Citigroup, India is the overall most expensive market in the region for 2007 after considering various metrics such as price-to-earnings ratio,
book value, dividend yield, cash flow, return on equity and enterprise value.
Citigroup has termed India more expensive than China, Hong Kong, Philippines and Australia, while it has named Thailand, Korea, Taiwan, Indonesia and Malaysia as the
cheapest.
On individual metrics, India has been ranked as the second-most expensive in terms of price-to-earnings ratio and price-to-cash flow ratio based on 2007 estimates, while it is
the most expensive in terms of price-to-book value and dividend yield for the year.
Citigroup expects India to give the second highest return on equity this year -- a gain of 20.8 per cent, after a 25.2 per cent return in Indonesia.
The Bombay Stock Exchange's benchmark index Sensex has grown by more than 54 per cent in the past one year from about 10,000-points level to over 15,500 points currently.
The total investors' wealth, measured in terms of the cumulative market capitalisation of all the listed entities, has grown to about Rs 45,60,000 crore from about Rs 27,12,000
crore a year ago on July 21, 2006.
It had dropped below Rs 25,00,000 crore level after a sharp fall in May last year, when the Sensex registered its biggest one-day fall of 826 points on May 18 and its biggest
intra-day fall of 1,112 points on May 22.
The index crossed the historic milestone of 15,000 on July and touched an all-time high of 15,683 on Friday last week. The index has added over 7.35 per cent in the past month.
Analysts at Citigroup said in their latest Asia Macro Investigator report that India has "lofty valuations both relative to its own historical levels and other markets."
"It is the most expensive market in terms of P/BV, dividend yield and second most expensive in PE, P/CF and EV/EBITDA," Citigroup analyst Chris W Leung said in report.
Price-to-book value (P/BV) is the ratio of market price of a company's share price over its book value of equity. The book value of equity, in turn, is the value of a company's
assets expressed on the balance sheet.
The P/E ratio of Indian stock market is estimated at 19.7 for this year -- the second highest after China's 19.8. The P/E ratio of a stock is a relative measure of the price paid for a share relative to the income or profit earned by the firm per share. A high P/E suggests investors are expecting higher earnings growth in future compared to lower P/E firms.
In terms of the sectors, overall household products segment is the most expensive in the Asia pacific region followed by Software, Health Care equipment, Pharma Biotech
and media. Meanwhile, Auto, Consumer Durables Hardware and energy are among the cheapest sector in the region.
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