India Valuation: Not Cheap Anymore?

After a 20% move today, India could be considered expensive on a historical basis, but a lot of growth is now expected. To what extent should India valuation price that in?

Remember: EM always overshoots on valuation and prices in growth expectations as opposed to current earnings.

According to Merrill Lynch's Michael Hartnett, here are the EM forward PE's as of close Friday. SENSEX rallied 21% in U.S. dollar terms today putting MSCI India on a forward PE of 17.4X, roughly a 40% premium to EM. Note that in the past 10 years, the average India premium over EM has been 24%.

Mkt 12mnth fwd PE
Taiwan 27.1x
India 14.4x
China 13.5x
Korea 12.7x
EM 12.4x
Israel 11.9x
Mexico 11.5x
Brazil 11.5x
South Africa 9.8x
Turkey 8.5x
Russia 7.8x