India's persistent valuation gap with Asian peers remains intact despite months of underperformance, according to veteran investor Manishi Raychaudhuri. As reported by The Economic Times, the structural case for India appearing expensive relative to North Asian markets has actually widened in a counterintuitive way during this period. This valuation disparity continues to be a significant concern for investors evaluating the Indian market's attractiveness relative to regional peers.
The primary driver of India's valuation challenges lies in declining earnings estimates across all sectors, creating what Raychaudhuri describes as the market's biggest problem. According to The Economic Times, consensus EPS estimates for 2026 and 2027 are declining with no exceptions, marking a stark contrast to other Asian markets. Raychaudhuri emphasizes that there is not a single sector in India where estimates have moved higher, making this the single biggest problem the Indian market is facing. This represents a significant shift from previous periods when India's earnings outlook had been more optimistic, contributing to the current valuation concerns.
While India faces declining earnings estimates, Korea and Taiwan are experiencing surging EPS forecasts that have made their rallies more attractive to investors. As reported by The Economic Times, Korea EPS has increased by 120% in 6 months, while Taiwan EPS has risen 30-40%, creating a stark contrast with India's earnings outlook. This divergence in earnings trajectories is a key factor in the persistent valuation gap between Indian and North Asian markets.
Despite the valuation concerns, Raychaudhuri identifies specific opportunities within India's market. He favours private sector banks on valuation grounds after years of underperformance, and industrials, particularly large conglomerates with cross-border exposure and select defence companies. On the consumption side, he highlights four-wheeler automakers and healthcare and diagnostic chains as sub-segments with strong growth visibility, while noting that e-commerce and food delivery, though expensive, have compelling long-term outlooks. His most emphatic advice for Indian investors is geographic diversification - moving a portion of capital into emerging markets and the broader Asia region, avenues he says are increasingly accessible even for retail investors.
Raychaudhuri warns of potential geopolitical risks impacting North Asian earnings, particularly highlighting the Strait of Hormuz risk that Asia is currently ignoring. As reported by The Economic Times, he emphasizes that the opportunity set in India remains real but risks being overshadowed by the momentum currently concentrated in North Asian markets. This geopolitical factor adds another layer of complexity to the valuation analysis and investment considerations for the region.
