| "Indian companies are currently offering 21 per cent return on equity, which is highest among emerging markets. However, the recent run-up has turned the valuation relatively expensive to other emerging markets," Garner said. |
| India's benchmark share indices, Bombay Stock Exchange's Sensex and National Stock Exchange's Nifty, have risen over 45 per cent each so far in 2007. |
| There are many positives in favour of the Indian share market, including structurally higher gross domestic product growth, rapid urbanisation, and global integration, Garner said. |
| However, on a relative basis, Indian market is less attractive when compared with markets such as Brazil and Russia, he added. Garner also said these two markets are trading around 12 times their one-year forward earnings, compared with India's 22 times. |
| Morgan Stanley is 'overweight' on emerging markets but is "cautious" on the Indian market, he said. "Average return from emerging markets is expected to be 14 per cent by December 2008. |
| However, return from Indian equity market can be less than this rate in dollar terms," Garner said. However, he said some parts of the Indian market remain unexplored and could still offer some value. |
| Garner is positive on shares of Indian telecom, steel, energy, and fast moving consumer goods companies for appreciation based on value. He expressed concern over valuations of Indian banks and software companies. |
| "There is fantastic infrastructure-related spend taking place in India, and local (capital goods) companies are geared up for leveraging this opportunity," Garner said. |
| However, valuation of some capital goods companies have turned expensive when compared with peers in other markets, he said. |
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