India growth prospects robust, justify high valuation: BlackRock Research

Mumbai: A BlackRock research platform has pegged India's current equity risk premium (ERP) around 4.9%, close to the metric's historical average, indicating that valuations may not be as stretched as high earnings multiples imply.

In its Mid-Year 2025 Global Outlook, BlackRock Investment Institute said stable policies and rising domestic demand have continued to attract strong investor interest in India, even amid elevated equity valuations. It believes that India's robust growth prospects justify the valuation premium over the long term.

ERP is a valuation gauge reflecting the extra premium that investors require to compensate for the additional risk of equity investment compared with a risk-free asset. The MSCI India Index currently trades at a forward P/E of around 22.5, slightly above its 10-year average and nearly twice that of broader emerging markets.

Among emerging markets, the Institute sees better investment opportunities in India, while favouring Japan among developed markets. "India offers one of the most compelling opportunities across emerging markets for investors looking to tap into mega forces," said Vivek Paul, head of portfolio research, BlackRock Investment Institute.