The bull run on the bourses is likely to continue, with the Securities and Exchange Board of India asserting that the Indian stock market is undervalued.

In a presentation to the parliamentary consultative committee on finance, the capital market regulator has noted that India, with an estimated 7 per cent gross domestic product growth in 2003-04, had a price-earning ratio of just 16.8 in November, much lower than that of the other Asian economies.

The price-earning ratios of stock markets in Singapore, Hong Kong, Thailand and Taiwan are much higher at 22.2, 18.7, 22 and 41.9, respectively.

The GDP growth rate estimates for these countries are, however, significantly lower at 0.8 per cent, 1.1 per cent, 4.7 per cent and 3 per cent, respectively.

China has a much higher price-earning ratio of 33.7, though its estimated GDP growth rate is also higher at 8 per cent.

South Korea is the only country that has a lower price-earning ratio than India at 11.6. However, its estimated GDP growth rate for 2003-04 is also lower at 2.3 per cent.

According to Sebi, the current rally in the stock market is broad-based, with the stock prices of 15 sectors climbing over 50 per cent between May and August this year.

As many as 25 sectors saw their stock prices rising 25-50 per cent, while nine registered an increase of up to 25 per cent.

The regulator's analysis also seeks to dispel fears about the nature of the current rally. It said the quality of players, products and market structure in the current rally was distinctly different from that in 2000.

The rally in 2000, it said, was led by operators and concentrated in the information technology, communications and entertainment sector.

The current rally, however, was broad-based, covering the core sector, and in stocks with strong fundamentals, it added.

Among the emerging economies, Sebi pointed out that India attracted foreign institutional investment of only $5.65 billion in January-October, 2003, compared with $7.5 billion in South Korea and $13 billion in Taiwan.