Can't Justify 31x Earnings: Aswath Damodaran Calls India Most Expensive Equity Market

The Indian stock market is the most expensive globally, even more than the US and China, according to valuation expert Aswath Damodaran. 

The New York University finance professor argues that no amount of optimism about India's growth story can justify its steep valuations, especially when benchmark indices in other regions, such as China's Shanghai Composite, have fared better.

"The most expensive market in the world is India, and no amount of hand waving about the India story can justify paying 31 times earnings, three times revenue and 20 times Ebitda in the aggregate for Indian companies," Damodaran wrote in his latest blog.

Both the Sensex and Nifty are currently trading 10% lower than their all-time highs from last year while global peers have fared better in 2025.

Damodaran pointed out that while the US and China also have expensive valuations, India's stock market remains significantly higher than most markets worldwide. He also noted that while some Latin American and Eastern European markets appear cheap, they come with risks such as political instability and slow economic growth.

Damodaran's analysis reflects current stock market trends. Benchmark indices in Argentina, Brazil and Chile have outperformed most global peers, while India and China cooled off in 2024, posting only single-digit gains. Argentina's Merval Index surged over 170% in 2024, making it the best-performing index among those he tracked.

In contrast, African markets trade at the lowest price-to-earnings multiples, while Middle Eastern markets often appear expensive due to a high concentration of financial firms, which typically report low or no revenues.

India's equity markets have been under pressure due to weak corporate earnings, leading to a selloff. Even after a 10% decline from their highs, Indian stocks continue to trade at a premium compared to global markets.

Damodaran warned that higher returns often come with higher risk. "Higher returns often go hand-in-hand with higher risk," he warned.

The valuation expert advised investors to factor in country-specific risks when evaluating stocks and to demand higher expected returns in riskier markets.

In his blog, Damodaran said that while some emerging markets have delivered higher returns than developed ones, they also come with higher risks. He pointed out the need to factor in country-specific risks and demand higher returns in riskier markets.