NYU Stern Professor Aswath Damodaran, a renowned valuation expert, recently stated that Indian stocks have become an attractive investment proposition following a significant market correction. Speaking on November 2, 2026, Damodaran highlighted that the withdrawal of foreign institutional investors (FIIs) might paradoxically indicate a favorable time for entry into the Indian equity market.
A Shift in Valuation Perspective
Damodaran's current assessment marks a notable shift from his stance in early 2025, when he expressed reluctance to invest in India due to what he considered exorbitant valuations. At that time, Indian stocks were trading at approximately 31 times earnings, a figure he deemed difficult to justify. Now, with the market correction, valuations have fallen to around 20 times earnings, making them considerably more appealing.
"I was reluctant to invest in India at the start of 2025 precisely because everything looks so expensive," Damodaran told ET Now. "I think at this point, given the correction and given that the India story still has legs to it long term, I think this is a good time to enter."
FIIs as 'Sheep': A Contrarian View
The 'valuation guru' provocatively labeled foreign institutional investors as "sheep," suggesting their reactive behavior to market sentiment makes their exodus a potential contrarian indicator for shrewd investors. "The fact that foreign institutional investors are leaving to me is a good sign because they're sheep," he explained. "The fact that they're leaving might be a good sign that this is the time to enter because they often are reactive. They reflect what the mood of the moment is."
This sentiment underpins his renewed optimism for Indian stock pricing compared to a year and a half prior, when he had publicly described India as the world's most expensive equity market in his blog, 'Musings on Markets'.
The India Story: Reality Check and Long-Term Potential
Damodaran acknowledged that the "India story" has faced a "reality check" after years of excessive investor optimism that often overlooked structural weaknesses. He noted that a democracy's growth path is rarely linear, and recent disappointments were to be expected. However, he also cautioned against an overreaction, dismissing the view that India's growth potential has evaporated entirely.
Despite the recent turbulence, Damodaran maintains that India's long-term economic potential remains substantial. He emphasized the importance of focusing on "healthy growth" that creates value, rather than chasing unrealistic double-digit growth targets. "You don't need 10% real growth to justify 20 times earnings," he asserted, advocating for a focus on sustainable development aligned with India's strengths.