India Stock Market Valuations and Expected Future Returns

Updated at Tue, 07 Apr 2020 22:23:54 -0500
Country: India (updated daily) check out Global Overview for detailed methodology.

Ratio of total market cap over GDP: Maximum - 158%; Minimum - 40%; current - 49.27%
Expected future annual return: 18.5%

ETF Used for dividend yield: INDA (Yield=1.43%)
Market Index used: BSE SENSEX
Current Annual GDP: $2,742 billion US dollars or 208,985 in billions of national currency (GDP in Local Current Prices Annual Growth=11.52%)
Data since year 1997

India Historical GDP Growth

Historical GDP of India in billions of national currency. The GDP in local current prices has grown at the annual rate of 11.52% over the past 8 years. Please note this growth rate includes the effect of price inflation and it is NOT the real GDP growth rate. Current Annual GDP: $2,742 billion US dollars or 208,985 in billions of national currency.

India GDP (Billion, National Currency)

Historical Stock Market Cap

Historical total market of India in billions of national currency. This value is normalized using the data published by WorldBank. BSE SENSEX is used for the normalization. The Bombay Stock Exchange SENSEX also referred to as BSE 30 is a free-float market capitalization-weighted stock market index of 30 well-established and financially sound companies listed on Bombay Stock Exchange.

India Total Market Cap (Billion, National Currency)

Historical Ratio of Total Market Cap over GDP (%)

The current ratio of total market cap over GDP for India is 49.27%. The historical high was 158%; the historical low was 40%. If we assume that the ratio will reverse to the historical mean of 76% over the next 8 years, the contribution to expected annual return is 5.53%. This is the detailed historical chart of the ratio.

India Ratio of Total Market Cap over GDP (%)

Predicted and Actual Returns

From the equation presented on the U.S. market valuation page,

Investment Return (%) = Dividend Yield (%) + Business Growth (%) + (Re/Rb)(1/T)-1

We can compute the predicted and actual returns of the India stock market over a given time period, T. In the calculation, we set T to equal eight years, the approximate length of a full economic cycle. The calculated results are presented in the chart below. The green line indicates the expected, or predicted return if the market ratio trends near the average ratio of 76% over the next eight years.

The blue line indicates the actual, annualized return of the India stock market over eight years. We use “BSE SENSEX” to do the actual return calculation. We can see the calculations largely predicted the trend in the stock market as the blue line is closely parallel to the green line.

Predicted and Actual Returns of India


The stock market of India is expected to return 18.5% a year for the coming years. This is from the contribution of economic growth in local current prices: 11.52%, Dividend Yield: 1.43% and valuation reverse to the mean 5.53%.

This is the projected return of the stock market in India relative to other countries. Click on each bar in the chart to go to other countries:

You can go here to see what international stocks Gurus are buying.

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