ET Intelligence Group: Valuations of Indian equities have eased after the recent sell-off but that may still not be enough to lure foreign funds back here as the country’s main share indices continue to trade at a premium to emerging market peers.

At the end of Tuesday’s trading session, the NSE Nifty 50 and the BSE Sensex had a trailing price-earnings (P/E) multiple of 21.2 times and 21.3 times, respectively. This compares with their P/Es of 22.8 at the beginning of the current calendar year. The Indian benchmark P/Es have softened from the levels of over 23 two years ago. This shows the market is cheaper than it used to be, tempering investor concerns of excessive valuations, which, along with slowing growth, has contributed to foreign investors‘ risk-aversion towards India.

The valuation premium of Indian benchmarks has now narrowed with respect to nine out of 12 major global equity indices. For Instance, Nifty’s premium over the Hong Kong benchmark has reduced to 1.8 times from 2.3 times at the beginning of the year. The premium with respect to the German DAX and French CAC 40 has fallen to around 1.2 from 1.5 by similar comparison. In the case of other benchmarks, including the US Dow Jones and S&P 500, Indian benchmarks continue to trade at a marginal discount, as they did earlier.
The benchmarks have shed over 8% in 2026 so far, including a 4% drop since the beginning of March as investors turn cautious amid the rising concerns over the impact of the West Asian conflict between Iran and Israel. On a year-to-date basis, India has the second-worst performing equity market among major markets in the world behind Indonesia where the local benchmark has lost 14%.

Mumbai: Indian stocks Tuesday rebounded from multi-month lows, tracking gains in risk assets across Asia, while the rupee climbed 53 paise against the US dollar after crude oil prices slumped about a quarter – or nearly $30 a barrel – over two days from levels not seen since the earliest days of the Ukraine war nearly four years ago.

The rupee closed at 91.80 per dollar amid likely RBI interventions, prompting traders to buy the dip. It had previously closed at a record low of 92.33. Oil prices plunged nearly 10% from their panic-driven peak a day earlier, but were paring losses as of press time.

Risk assets mirrored the currency’s smart recovery. The NSE Nifty climbed 1% to 24,261.60. The BSE Sensex advanced 0.8% to 78,205.98.

Sectoral Indices Up
Both gauges had fallen around 3% over the past two sessions.

“Slide in crude prices yesterday [Monday], after touching $119, and further falls on Tuesday led traders to cut their bearish bets,” said Siddarth Bhamre, head of research, Asit C Mehta Intermediates. “The West Asia conflict had led to the build-up of ‘panic shorts’ in the system, which got squeezed out as Donald Trump indicated the war is near its end.”
Across Asia, South Korea jumped 5.4% while Japan gained 2.9%. Hong Kong and Taiwan climbed more than 2% each. China advanced 0.7%.
Analysts said that while the rebound could extend, investors remain cautious given the volatility in crude oil prices on account of the conflict in West Asia.
Some uncommitted investors with higher cash holdings are also likely to have deployed money since the declines offered decent entry points, said Bhamre.

All sectoral indices climbed except the IT and oil & gas indices. The Nifty Auto index jumped 3.1% and Nifty Consumer Durables index gained 2.7%. Bank Nifty advanced 1.6% and the PSU Bank index moved 2.2% higher. “Some weak hands squared off their short positions after Trump said that the war could wrap up soon. It also led to some long build-up in outperforming sectors, such as auto and pharma,” said Rajesh Palviya, head of technical and derivatives, Axis Securities.

The rupee, meanwhile, traded in the range of 92.19 per dollar and 91.72 per dollar. Brent crude oil prices cooled to around $93 per barrel, from about $119 per barrel Monday after the US President said “the war is very complete.”

The dollar index, too, decreased to 98.5 from nearly 100 levels the previous day, strengthening Asian currencies.

‘Cautious Optimism’
Still, fuel price fluctuations remain the key driver for the rupee’s trajectory, and the pace of deprecation would increase if oil prices trade above $100 per barrel, traders said.

“With crude prices cooling and the dollar slightly weaker, sentiment for the rupee has improved. I expected the trading range to remain between 91.25/$1 and 92.60/$1,” said Jateen Trivedi, currency research analyst at LKP Securities. “Crude price movements and the direction in the dollar index would continue to guide the currency’s near-term trends.”

Energy prices remain a major concern for risk assets, too, with analysts explaining a lower-than-expected decline in the fear gauge to suggest that a spike in oil prices could dent stocks.

The Volatility Index (VIX) dropped 19.1% to 18.9 – indicating that traders tempered risk expectations.

Foreign portfolio investors sold shares worth ₹4,672.7 crore on Tuesday. Their domestic counterparts bought shares worth ₹6,333.3 crore. In March, global investors dumped stocks worth ₹33,429.6 crore.

Bhamre said while the rebound could extend in the short term, the preceding corrections were substantial. “Investors are not advised to get carried away with the rebound since it is unsure if the bottom is made,” he said. “There is no big rally in the offing. Unless the tensions flare up again, the markets are expected to see minor declines instead of deeper cuts. The volatility and global risk-off sentiment could keep a lid on the gains.”

The initial public offering of SoftBank‘s PayPay is likely to price around the low end of its marketing range as war in the Middle East roil markets, said ‌two people ⁠familiar ⁠with the matter.

The IPO book was covered more than five ​times, one of the people said. It has now closed and ​pricing will be finalised after U.S. market hours on Wednesday, the person said.

The Japanese payment app operator was offering 55 million American depositary ⁠shares, priced $17 ‌to $20 apiece, a filing this month showed, targeting a valuation of up to $13.4 billion.

The ⁠people declined to be identified as the ​information is not public. PayPay declined to comment.

PayPay ​has played a central role in encouraging Japanese consumers to move away from a preference for cash by offering rebates on its payments app.

However, it has had a bumpy IPO path. Its ‌IPO roadshow was initially postponed after markets were jolted by conflict in the Middle East, ​Reuters reported ​last week.
It ⁠had already postponed the IPO last year during the U.S. government shutdown, which disrupted regulatory processes and delayed regulatory filing.

PayPay ​plans to list on the Nasdaq under the symbol “PAYP”. Reuters first reported its plans for a U.S. listing in 2023.