Indian Market Valuations Normalize Amidst Expensive Global Equities

• India's Sensex and Nifty one-year forward PE multiples have normalized to long-term averages, unlike many global markets.
• BSE MidCap 150 trades slightly above its long-term PE average, while BSE SmallCap 250 remains at a premium despite corrections.
• Moderation in valuations follows years of premium trading, supported by domestic inflows despite foreign selling and subdued earnings.
• Weak earnings momentum (4-5% growth) and limited fiscal flexibility from the Union Budget keep investor sentiment cautious.
• Foreign institutional investors sold $4 billion in January but have shown marginal buying recently; sustained turnaround depends on macroeconomic triggers.