The Buffett indicator, a valuation measure that compares a country’s total equity market capitalisation with its nominal GDP, is often used to gauge whether stock markets are overvalued or undervalued. Ratio above 100 suggests that equity valuations are becoming richer relative to economic output, while ratio below 100 indicates relatively cheaper markets.

businessline analysis shows that India’s Buffett indicator has moderated to 111.6 per cent as of March 31, 2026, from the elevated levels seen during 2024-25. Although valuations remain above the long-term average, India is considerably less overheated than several major equity markets, including the US, Taiwan, Japan and South Korea.

India’s Buffett indicator has undergone sharp swings over the past decade, largely reflecting changes in equity market sentiment and economic growth. The ratio stood at 76.6 per cent in June 2015 before declining to 68 per cent by March 2016. It recovered steadily during the following years, reaching 93.4 per cent by December 2017 as equities rallied.

The most dramatic movement came during the Covid-19 pandemic. The indicator plunged to 52.4 per cent in March 2020 as market capitalisation fell sharply amid the global sell-off, despite nominal GDP remaining relatively stable. Massive liquidity, improving corporate earnings and a strong post-pandemic recovery then pushed valuations rapidly higher.

The ratio crossed 100 per cent in March 2021, and climbed to 114 per cent by September 2021 and, after a brief correction in 2022, it resumed its upward march. It peaked at 156 per cent in September 2024, when India’s equity market capitalisation reached $5.68 trillion against a nominal GDP of $3.63 trillion. Since then, softer equity markets alongside continued expansion in nominal GDP have brought the ratio down to 111.6 per cent by March 2026, indicating that valuations have cooled from their recent highs.

Cross-country data as of March 31, 2026, show that several markets are much more overvalued than India. Market cap to GDP ratio for Taiwan is at 363 per cent, supported by the global dominance of its semiconductor industry, while the US stands at 214.7 per cent, underpinned by the enormous market value of technology giants and sustained investor enthusiasm for artificial intelligence-related companies. Japan at 178.4 per cent and South Korea at 155 per cent also remain significantly above India, reflecting strong export-oriented corporate sectors and globally-competitive manufacturing and technology companies.

India’s 111.6 per cent places it below these overheated markets, but above countries such as Singapore at 99 per cent, South Africa at 95.5 per cent, France at 94 per cent and the UK at 93 per cent. While Indian equities continue to command a valuation premium relative to many developed and emerging markets, the excesses visible during the 2024-25 rally have moderated considerably.

Published on July 23, 2026