Escalating tensions in West Asia and the resulting market correction have revived a familiar debate on Dalal Street: are Indian equities finally getting cheaper?
Benchmark indices have come under pressure over the past two weeks amid global risk aversion, rising crude oil prices and persistent foreign portfolio investor outflows, prompting investors to reassess valuations after trade-deal-fuelled exuberance and a sharp rebound from budget-session lows.
However, the correction has only partly cooled the market’s froth. A Mint analysis of over 3,400 BSE-listed companies shows that while valuations have moderated from recent highs, a significant portion of stocks still trades at premium multiples.
Valuations across the broader market were visibly stretched when the Sensex touched its 52-week high of 85,762.01 on 2 January 2026. At that point, a notable share of companies were trading at extremely high earnings multiples.
Mint’s analysis shows that about 14.6% of BSE-listed companies were valued at more than 80 times their earnings around the market highs. Another 5.2% traded in the 60–80x band, while around 11.1% were priced in the 40–60x range. Nearly 15.8% of companies traded at multiples between 25–40x, and more than a quarter of the market was valued in the comfortable 10–25x band.
The recent correction has moderately altered this distribution. By 26 February 2026—even before geopolitical tensions escalated further—the share of companies trading above the lofty valuations of 80x had already eased to around 12% and following the volatility, that share declined further to about 11%.
Meanwhile, more stocks have shifted into lower valuation brackets. The share of companies trading in the 5-10x earnings range has increased to about 8.5%, compared with roughly 4.9% at its one-year high levels.
“Valuation comfort has improved slightly. India is more investable than it was six months ago—but it remains a conviction, not a value play,” said Sachin Jasuja, head of equities and founding partner at Centricity WealthTech.
Large caps see moderation
Within the large-cap universe, the BSE LargeCap index trades at a P/E multiple of about 22.7x, slightly below its five-year average of 24.1x, indicating some moderation after the recent correction.
The share of large-cap stocks trading above 80x earnings has declined to around 15.4% as of 10 March, down from 18.8% at the market highs. At the same time, the proportion of companies in the 40–60x valuation band has increased to 24.8% from 20.5%.
“Nifty valuations are heading sub-20x on a one-year forward basis, which brings meaningful comfort for large-cap investors,” said Prabhakar Kudva, director and principal officer—portfolio management service at Samvitti Capital.
Mid-caps still expensive
The correction has had a more limited impact on the mid-cap universe. The BSE MidCap index currently trades at about 29.2x earnings, nearly 8% discount to its five-year average P/E multiple.
At its highs earlier this year, about 21.7% of mid-cap companies traded above 80x earnings. After the correction, the share has eased only slightly to around 21%. Nearly 26% of mid-cap companies continue to trade in the 25–40x earnings band, indicating that valuations remain elevated.
Kudva said the correction has removed some froth but not enough to call the segment cheap. “Selectivity matters. There are pockets of value, but as a basket, mid-caps still need either further correction or earnings catch-up to become genuinely attractive,” he said.
Small caps see a sharper reset
Small-cap stocks may have seen the most visible valuation compression. The share of companies trading above 80x earnings has fallen to about 11.4%, from nearly 15% at the market peak.
The BSE SmallCap index currently trades at around 25.9x earnings, compared with its five-year average of 30.6x. Meanwhile, the share of companies trading in the 10–25x band has risen to nearly 34% from about 28%.
“The real opportunity lies in beaten-down small and micro caps. Several quality names look undervalued, but investors need a 3–5 year horizon and tolerance for volatility,” Kudva said.
India’s valuation premium persists
Despite the moderation in valuations, India continues to trade at a premium compared with most emerging markets. The Nifty 50 currently trades at about 18.9 times its one-year forward earnings, higher than Brazil’s Ibovespa at 10.3x, Hong Kong’s Hang Seng at 12.4x, and Indonesia’s Jakarta Composite at 14.7x.
The index also trades above China’s CSI 300 at 17x and South Korea’s Kospi at 9.2x. However, India’s valuation remains broadly comparable with developed markets, with the S&P 500 trading at about 21.5x and Japan’s Nikkei 225 at 22.1x.
“India’s structural valuation premium remains elevated. Nifty trades at 19–20x forward earnings versus MSCI EM’s ~12x and China’s ~10–11x, implying a 60–80% premium—meaning markets remain less expensive, not cheap,” Jasuja said.
Vinod Nair, head of research at Geojit Investments, said the moderation in valuations could support markets in the near term.
“The broad valuation of Indian equities has contracted to below five-year averages, which is attracting interest and may support the market in the short term,” Nair said.