Why Indian equities should fall..

Indian market has given almost 20% more than other emerging markets in the last one year. Can this continue, the answer is no.

The primary reason being that investor in both the markets is same. He puts money in other emerging markets and in India also. So, if India becomes expensive, he will put in others.

Indian 10 year yield is trading at 7% while earning yeild of stock market, E/P of India is closer to 6.5%. This means Indian equities, in general, are expensive than Indian bonds. Since stocks are riskier than bonds, stock yield should be higher than earning yield.

Though P/E of sensex is at 16 times but individual stocks are trading at in excess of 20 times, which is way expensive.

Last but not the least, investor's could be betting hugely on the budget and quarterly earnings. They could be in for disappointment.