The sell-off in the global equity markets has sparked fears that this may be a repeat of 2008, for the world and for India. There are a few telling differences.
Pick-Up Likely In Corporate Earnings
Economic growth and corporate earnings are expected to pick up, not just for India but for the world at large. Earnings are not even growing at half the pace compared to 2007-08 when they had peaked.
Also Read: Four Charts to Help You Navigate the Melting Markets
Domestic Flows Act As A Bulwark
The mutual fund inflows in the last five months of 2017 versus 2007 show the Indian stock market is being driven primarily by domestic flows this time around. It's less likely that the flows will vanish, especially given the investments through systematic investment plans.
Stocks Still Cheaper
Valuations, too, are lower than the last time. Stocks are trading 20 times the one-year forward earnings, still lower than 2008's 22 times. The market cap-to-GDP ratio, another indicator of stock market valuations, is nearly half the 2007-08 level.
Also Read: Rs 30,000 Crore Waiting To Be Invested In Indian Equities, Says Motilal Oswal
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