India's benchmark stock market index, the Sensex, may have fallen 55 per cent this year, but India is still not the world's cheapest market. Several other indices in emerging and European markets are trading at PE (price to earning) multiples lower than the Sensex.

This suggests that the selling spree by foreign institutional investors, the key reason for the collapse of emerging markets, is unlikely to end anytime soon.

Stock markets typically discount future earnings in current prices, so the PE multiple (which divides stock prices by earnings per share) is one of the most important indicators for investors.

According to Bloomberg data, up to October 29, the Sensex is trading at PE of 9.18 (down from the 20s at the start of the year), but those of Thailand, Indonesia, Taiwan, Malaysia, Pakistan, Hong Kong and Korea are lower (see table). Only China, New Zealand, Japan and Australia are traded higher than India.

In Europe even the UK's FTSE 100 is trading at 7.25.

Still pricey (PEs of key emerging markets)
Indices	31/12/2007	29/10/2008
AMERICAS*
Mexico Bolsa (Mexico)	15.50	8.89
ASIA/PACIFIC
Stock Exch of Thai (Thailand)	44.3	5.88
Jakarta Composite (Indonesia)	20.1	6.92
Taiwan Taiex (Taiwan)	19.0	7.37
Hang Seng (Hong Kong)	20.26	7.75
Kospi (Korea)	18.09	8.05
Karachi 100 (Pakistan)	16.09	8.79
Kuala Lumpur Comp (Kuala Lumpur)	27.99	8.99
Sensex (India)	15.2	9.18
* As on 29/10/2008 � 9 pm (IST)

According to a Citi group report, six emerging Asian markets that report local and foreign activities (including India) saw FII outflows of an astounding $60 billion in calendar 2008 to date.

In India, FII outflows stood at Rs 16,890 crore (Rs 168.9 billion) in October so far, the highest ever monthly outflow.

Market estimates put the FIIs' India portfolio last October at $250 billion and it has now fallen to $60 billion.

"Even after this meltdown, the Indian market is relatively more expensive. We can probably expect to see some more selling from FIIs before the markets stabilise," said S Ramesh, COO of Kotak Mahindra Capital.

The Citi report predicts that Singapore, Hong Kong and Thailand should see faster economic slowdowns so "India is considered better in terms of economic growth perspective due to greater policy flexibility and larger domestic market."