India’s Stock Market Is Fairly Valued, Says Motilal Oswal’s Raamdeo Agrawal

India’s stock market has been a topic of intense discussion across investment circles, especially as it scaled new highs in 2025. According to Raamdeo Agrawal, Chairman and Co-founder of Motilal Oswal Financial Services, the current valuation of India’s stock market is “fair” – neither excessively expensive nor deeply undervalued. This perspective is especially crucial for investors seeking clarity in a market characterized by aggressive rallies, periodic corrections, and robust participation from domestic investors.

The Big Picture: A Market Driven by Compounding and Resilience

Agrawal’s optimism about the Indian market rests on several broad trends. First, India’s market cap has soared to ₹460-470 lakh crore, doubling every four years, a pace driven by both global macro factors and domestic capital inflows. Over the past 45 years, Indian equity markets have averaged 15-16% annual growth, translating to the Sensex multiplying 800 times—from just 100 in 1980 to around 80,000 in 2025.

“Every correction in Indian markets has been followed by a recovery, and that is not by accident,” says Agrawal. What underpins this resilience is not just foreign investment, but relentless buying by domestic investors, which has cushioned falls and supported long-term growth.

Understanding Why the Market Is ‘Fairly Valued’

After a phenomenal multi-year run, markets saw a healthy correction in early 2025.

• India stock market fairly valued

•  

The Nifty’s price-to-earnings ratio dipped below 20x, down from highs of 23-24x, reflecting the fading of some of the speculative fever in small and midcap stocks. As Agrawal notes, “Excesses were clearly visible in the market, making everybody uncomfortable. This is a very healthy correction”.

Agrawal expects robust earnings growth to continue, with Nifty EPS forecasted to rise from ₹1,050 to ₹1,150-1,200. This supports current valuations even in the face of volatility, underpinned by government spending and the pick-up in credit flow.

Future Outlook: Sensex 3 Lakh by 2035?

One of Agrawal’s more striking forecasts is that the Sensex could reach 1.5 lakh by 2030 and even 3 lakh by 2035, if compounding continues at the historical rate. He argues that now, with structural shifts such as the financialization of savings, rapid digitalization, and policy support for manufacturing and energy transition, the long-term runway remains intact.

Key themes to watch over the next decade include:

• Quick commerce opportunities

• Booming capital markets

• Clean energy transitions (solar, wind)

• Industrial policy-driven manufacturing surge

Each offers massive potential, though Agrawal cautions investors to prioritize valuation discipline despite promising sectoral trends.

Domestic Flows: The Backbone of Market Stability

Domestic investors have changed the market’s character since 2020. Their persistent buying on every correction has offset foreign selling, capped drawdowns, and created an environment where bear phases are shorter and recoveries swifter. This maturing of India’s capital markets enhances stability and gives long-term investors greater confidence.

How Should Investors Approach the Current Market?

1. Embrace Long-Term Compounding: Agrawal’s mantra, “Buy Right, Sit Tight,” remains relevant. Focus on quality businesses with sustainable growth and reasonable valuations.

2. Avoid Chasing Momentum: The recent correction in overheated midcap and smallcap stocks was a reminder that chasing rallies can be dangerous. Valuation matters.

3. Watch Earnings Growth: The forward Earnings Per Share (EPS) trajectory remains strong. Keep an eye on sectoral leaders in finance, digital, and manufacturing.

4. Look Beyond FII Flows: Domestic flows are now a powerful force. Short-term volatility from global factors is less impactful if underlying structural growth persists.

5. Have Sectoral Discipline: The next decade will reward allocations to sunrise sectors, but investing discipline and price sensitivity are crucial to benefit fully.

Conclusion

India’s stock market, in the eyes of Raamdeo Agrawal, is positioned for robust long-term growth—but caution is warranted. Markets are fairly valued after digesting previous excesses. The future holds remarkable potential as the economy transforms, but sticking to time-tested investment principles—quality, growth, compounding, and valuation—remains key for wealth creation in the years ahead.