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As the stock markets surged over the past one year amid the pandemic, midcap stocks outperformed the largecap stocks during the period.

A Motilal Oswal Financial Services report said that in the last 12 months, midcaps have risen by 80 per cent against a 42 per cent rise for the Nifty. In the last five years, midcaps have outperformed by 6 per cent, it said.

"In P/E (price to earnings) terms, the Nifty Midcap 100 is trading at a 3 per cent premium to the Nifty," the 'Bulls & Bears (August 2021) India Valuations Handbook' said.

It also noted that Nifty valuation is above its historical average.

"The Nifty trades at a 12-month forward P/E of 20.5x, at an 8 per cent premium to its LPA. P/B, at 3x, is at a 19 per cent premium to its historical average," it said.

Further, India's market capitalisation-to-GDP ratio has been volatile, touching 56 per cent (FY20 GDP) in March 2020 from 79 per cent in FY19.

It has rebounded to 104 per cent at present (FY22E GDP) - above its long-term average of 79 per cent.

The Nifty is trading at a 12-month forward return on equity (RoE) of 14.9 per cent, above its long-term average.

Barring the US, Indonesia, and India, July 2021 saw key global markets such as China, Japan, Brazil, Korea, Taiwan, Russia, and the UK, and other emerging markets end lower in local currency terms.

Indian equities are trading at 21.7x of FY22E earnings. The US is the only market trading at a premium, while other key markets continue to trade at a discount to India.