With 60% of equities trading at a premium to their historical averages, it is no surprise that the market cap-to-GDP ratio at 115% is way above the long-term average of 79%. Also known as the Buffett indicator, it is a measure of the total value of all publicly traded stocks divided by a country’s gross domestic product [GDP]. The only two occasions when the ratio was below the long-term average was in FY09 [55%] and in FY20 [56%]. Despite the pandemic-hit FY21 that disrupted businesses, a good amount of monetary stimulus found its way into stock markets, not just globally, but in India as well. While earnings growth has been robust so far, valuations are not cheap. With inflation concerns and QE taper announcement, the exuberance around India’s growth could cool off.