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Markets still have some way to go

LiveMint logoLiveMint 25-05-2014 Livemint

The 20% rise in the value of Indian stocks this year has seen the country’s market capitalization surpass that of Australia. India is now the 10th largest equity market in the world. But, as a proportion of gross domestic product (GDP), the market capitalization is only slightly above the 10-year average, which includes both the boom years and the Lehman-induced bust.

Naveen Kumar Saini/Mint

Yet, the fact that it is still way off the high seen in 2009-10 and 2010-11 indicates that the markets may still have some way to go. The other valuation measures such as the price to estimated earnings multiple also support this thesis.

The usual caveats apply in that a good part of GDP includes farm income, which doesn’t have a parallel in the market-cap numbers.

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