India deserves a different valuation framework in the current regime, says Delorean Partners' Amit Bhartia

India's equity market may require a fresh valuation framework rather than comparisons with historical averages, according to Amit Bhartia, founder of Delorean Partners and portfolio manager at Willow Run Capital.

In a recent LinkedIn post, Bhartia argued that investors are asking the wrong question when they conclude that India is attractively valued simply because its price-to-earnings (P/E) premium to the US and emerging markets has fallen below long-term averages. Instead, he said investors should assess whether the current economic, earnings, and geopolitical environment justifies the same valuation multiples that prevailed in the past.

Bhartia began his argument by citing renowned statistician John Tukey's observation that it is better to have "an approximate answer to the right question" than an exact answer to the wrong one.

According to Bhartia, the prevailing market view is focused on the arithmetic that India's relative P/E to the US and EM has fallen below historical averages. While the calculation may be correct, he argued that the conclusion could be misleading because valuation premiums are heavily influenced by the underlying economic regime.

"The right question is not, 'Where does India trade versus history?' The right question is, "What multiple does India deserve in this regime?" Bhartia wrote.

The first chart shared by Bhartia focuses on India's earnings performance relative to both the US and emerging markets.

According to him, India's valuation premium was built on the back of stronger earnings growth compared with peers. However, the chart tracking 12-month trailing earnings per share (EPS), rebased to 100 in March 2012, suggests that India's relative earnings strength has deteriorated in recent quarters.

"India was ahead of EM until September 2025, then gave it all back," Bhartia noted, adding that both the US and emerging market comparisons now point in the same direction, indicating continued deterioration in India's relative earnings position.

The second chart examines the evolving geopolitical backdrop and its implications for India.

Bhartia argued that for much of the past two decades, India benefited from Washington's focus on China. However, as India's trade surplus, technology exports, and student presence in the US have grown substantially, the country is receiving greater scrutiny from American policymakers.

He cited comments made by US Deputy Secretary of State Christopher Landau at the Raisina Dialogue, where Landau said the US would not repeat with India the same policy mistakes it believed it made with China two decades ago.

Bhartia also referenced recent analysis by Russia expert Alexander Gabuev, who argued that Russia is becoming increasingly dependent on China.

According to Bhartia, this reduces India's traditional strategic counterweight to China and leaves the country entering a new phase of US engagement with fewer geopolitical alternatives.

The third chart focuses on domestic economic conditions through what Bhartia calls the "Grassroots Distress Index."

The index combines three indicators — real entry-level IT salaries, microfinance loan delinquencies, and household net financial savings as a percentage of GDP — to measure economic stress at the household level.