Is it a "good time" to invest in India?

In this article, we will look at whether it is a “good time” to invest in India by looking at the price and earnings of the MSCI India Index.

Note that this article should not be viewed as an analysis of current or forecast future economic performance of India. Those require a different set of indicators which was discussed here.

Price to Earnings Ratio

By applying the reversion to mean approach, I’ve indicated on the following graphs, the points of interception between the current P/E with the 3-year rolling average and cumulative average p/e values.

• Intersection with 3 years rolling average are short-term indicators (circled)

• Intersection with cumulative average are long-term indicators (Highlighted shades)

Here’s how you should interpret the insights from the chart:

• Shaded in red: market being too optimistic

• Shaded in green: market being too pessimistic

• Circled in red: signs of potential overvaluation moving forward

• Circled in green: signs of potential undervaluation moving forward

Basically, based on the indicators set up above, it seems that India is trading at a range that seems to be