Indian-American academic and valuation expert Aswath Damodaran said that Indian stock markets are overvalued because it is difficult for Indians to invest anywhere else. Speaking to NDTV Profit, Damodaran noted that the country's real estate market is even more overvalued than equities.
The Professor at NYU Stern School of Business explained that he computed the P/E ratios for everyone and concluded that India had the highest P/E ratio among all countries. Damodaran, however, noted that one of the reasons why stock markets are overvalued is because Indians don’t have too many other options to put in their money.
"The country is getting wealthier. The wealth has no place to go but into Indian stocks. What exactly you're going to do? Will you buy Indian real estate which is even more overvalued? So there is no easy place for them to put their money," he told the news channel.
The analyst has highlighted overvaluations in India's real estate market earlier as well. This comes amid soaring realty prices. Rising home prices have emerged as a pressing concern for more than 81 percent of property seekers across India, with average residential values surging over 50 percent in just two years, according to ANAROCK’s Consumer Sentiment Survey for H1 2025.
The findings of the survey show a clear gap in the affordable housing market—62 percent of potential buyers are unhappy with existing options, and 92 percent are dissatisfied with where these projects are located.
"Looking ahead to 2026, we expect average housing price growth to range between around 6–7 percent, with rents likely to rise 7–10 percent - both outpacing inflation," said Anuj Puri, Chairman, ANAROCK Group.
India's most valuable real estate companies are now worth a combined Rs 16 lakh crore, as per the 2025 GROHE-HURUN India Real Estate 150 report. This is higher than the GDP of some countries like Kuwait.
'Indian markets are overvalued, but immediate correction is unlikely'
Damodaran explained why Indian markets are overvalued and how an immediate correction is unlikely. "I think part of the reason the Indian market is overvalued is a lot of institutional investors fear if you're not in the Indian market you're going to get left behind," he said.
Damodaran explained that this, along with no other place to invest in factor, has steadily pushed the markets higher, despite high valuations. There is no catalyst that can cause an immediate correction, he added.
Speaking about the constant FII outflows from Indian equity markets, Damodaran said they simply chase returns. "You have two good weeks in the Indian market. They'll be here really quickly," he said.
How will Donald Trump be as a stock?
Damodaran compared US President Donald Trump to a high-risk, extremely volatile stock. "I think the word I would use to describe him is absolutely unpredictable. He gets better deals for himself. He does keep people off balance. I would not want to be negotiating with Donald Trump because I have no idea where he's coming from the next minute,” he said during an interview with the business news channel.
Damodaran added that he would never buy the 'Donald Trump' stock as it will be highly unpredictable. "High-risk stock where I don't know what business you're at. You keep changing your mind. Today you're a retail company, tomorrow you're a manufacturing company because you're effectively whatever you woke up that morning and said you were going to be," he quipped.
Damodaran added that Chinese President Xi Jinping and Russian President Vladimir Putin would be less volatile stocks than that. Prime Minister Narendra Modi as a stock would represent India's growth story.
'Choose less activity over more activity in market'
Damodaran explained that investors should think for the long term, and not short term gains. Young entrants into the market should build up their investment portfolios to preserve and grow that wealth, he said. "If you have a job, do really well at that job because that's where you get the income to save. Most people who are investing in the market have other jobs on the side and they tend to invest as part of what they do in the evening or the lunch break. And if you're doing that, that's fine. But take care of what's creating the income that you're that you're then investing to preserve and grow," he said.
He advised investors to put in money in the correct index funds, and not to take catastrophic decisions. "You take all your money and buy that one stock that everybody say to you, I don't care how great the hype is, you are putting yourself at risk of losing 30% of your portfolio, 40% of your portfolio. Those are the kinds of mistakes you cannot come back from. So, make up your mind what you're going to do. Less activity over more activity. The more you trade, the worse your odds are of making good returns," he added.
Damodaran noted that healthcare is a sector which has tremendous potential to grow.
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