techynt;627196Personally I would stay away from investing USD in Indian stock market, unless one happens to be very sure about individual stock where they expect tremendous gains.
Reason is based purely on valuation metric. Given that inflation/interest rate in India is around 7-8%, stock investment should yield another 4-5% since it is more risky than FD or RBI bonds etc.
Which means stock should yield 12-13%, which means their PEs should be lower than 7.
Last time I looked I could not find a big market cap company, with good balance sheet and business model, with PE less than 12-15.
It's a momentum market, not trading based on valuation. Maybe, their earnings will grow a lot and they justify their current valuation. Maybe interest rate in India will also fall below 2%.
Buy if we are counting on interest rate falling, we are better off buying bonds....the gains will be huge if rates fall from 7-8% to 2-4%.
This is the classical mistake made by investor who invests only in developed markets.
You are bringing your cricket skills to football. You think both are ball games.
Emerging markets are very different. If you are waiting for good PE valuation to invest in India, you will never buy anything except PSU banks.
Even private banks have rich PE valuation.
Does it make India a bad market to invest ? No, you bring wrong scale of measure.
Even FMCG companies in India run to valuation of 50+. Will you ever invest in a consumer staple company at that valuation?
Probably you will give such valuation to internet startups!
India is growing market. Some use PEG for valuation. That is much better than using PE standalone.
You also commented about buying bonds to make money. We all know the theory.
Have you done trading in bonds in secondary market in India? What bonds will you buy and how will you make money?
Explain in practical way, how it works in India.
