Market cap-to-GDP nears 2007 peak: expensive valuations, but not a bubble yet

Subscribe to enjoy similar stories.India’s stock market is back near levels last seen almost two decades ago, with the market cap-to-GDP ratio, or the Buffett Indicator, at 137.70% in 2025—its highest since 146.52% in 2007, according to Mint’s analysis of Bloomberg data.While a high ratio can signal ‘expensive’ valuations in a textbook sense, several market participants say, this time, it may point to a different narrative.Even as India’s market cap-to-GDP ratio hovers near its 2007-08 bull run peak, the backdrop today is markedly different.

A larger share of the economy is now formalised, with far more companies listed than in the past, which has changed the context meaningfully, according to market participants.While a high ratio traditionally signals that a market is “priced for perfection” and may lead to more tempered future returns as valuations eventually revert to the mean, India’s position is often justified by its superior nominal GDP growth and the formalization of its economy, explained Bino Pathiparampil, head of research at Elara Capital.He suggested that while the “easy money” from valuation expansion may be in the past, long-term returns will likely be more closely tied to actual economic output and corporate earnings growth than to further multiple expansion.Also, the ratio tends to be high when markets expect strong earnings growth along with lower risk and interest rates, and lower when growth expectations are weak, or risks are higher, said Jay Kothari, lead investment strategist and head of international business, DSP Asset Managers.Besides a broader, higher-quality listed universe that captures a larger share of economic activity in India’s case, he highlighted that the rise in the market’s size