What does the Warren Buffet Indicator say about the Indian markets?

General
1

Here is the historic Indian market cap to GDP%
market cap to GDP = total market cap of all listed companies/GDP

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I have seen a lot of analysts when they talk about the Indian market’s valuations cite this ratio. But this ratio is not completely relevant in the Indian context.

A ratio of 100% density overvaluation and below 50% denotes undervaluation. This ratio makes sense in the American context because of the high market penetration. A 2016 Gallup poll found that over half of the Americans have invested in stocks as compared to about 2-3% in India. Over 35% of American household invest in stocks compared to 6% of Indian households.

The fact that there are millions of SME business operating in India which are not represented on the markets speaks to the risks of using this metric.

Maybe one day when the Indian markets are up there with the developed markets we can tout this metric.

2

He would also say - Buy Rcom :wink:

3

Indian Media always represents American context, whenever India media asks American/European “Fund” /Market makers , first thing they will say that , valuations are high. If we go through this link , https://www.bloombergquint.com/markets/2017/11/16/indian-market-must-decline-20-to-hit-fair-value-says-ubs-geoffrey-dennis it shows how hypocrite they are, One hand they say valuation are high but very “optimistic”

4

Why would he say Buy Rcom? Rcom’s quality as an investment is pathetic. There are multiple criteria that Rcom would fail as a Buffet pick, I would state only one here - Multi year declining EPS and even Loss in last FY (this criteria alone is sufficient to toss away Rcom as an investment consideration).

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